Important Modification Reminder!
If your loan has been "modified," you'll want to pay attention.
To make your monthly mortgage payments more affordable, loan modification programs like the government's Home Affordable Modification Program (HAMP) temporarily lower your interest rate to a below-market rate (as low as 2%).
However, this change is not permanent. Most modified mortgages, including HAMP loans, have interest rates that will begin to adjust after a set time period (usually 5 years). The rates will continue to adjust annually, until they reach what is called the "Interest Rate Cap."
While that term may sound daunting, the interest rate cap is simply the prevailing interest rate* at the time the loan was modified—not your original, pre-modification interest rate. (For example, if you modified your loan in December 2009, your interest rate will begin to adjust to the interest rate in December 2009.) After it reaches the interest rate cap, it will remain fixed for the life of the loan. (Your mortgage company can tell you the prevailing rate that applies to your modified loan.)
If you haven't glanced at your loan paperwork in awhile, you may want to review to see if you're among the many homeowners with adjusting modifications in 2014 or 2015. While your mortgage company is required to notify you before the adjustment, you can reach out to them immediately to see if you're impacted.
If you're concerned—or anticipate challenges—with a new monthly payment, your mortgage company can help review your options. This can include continuing to pay the modified payments or refinancing, such as with the government's Home Affordable Refinance Program (HARP) to lock-in at a stable interest rate.
*Based on the Freddie Mac Weekly Primary Mortgage Market Survey (PMMS) Rate for 30-year fixed-rate conforming mortgage loans, rounded to the nearest 0.125%, as of the date that the Modification Agreement was prepared.