If you recently received a letter about an adjustment to the interest rate on your mortgage modification, it means important changes to your rate and mortgage payment are beginning soon.
As the owner of your loan, Fannie Mae wants to ensure you are aware of—and prepared for—these changes. Make sure to review all the notices from your mortgage company and bookmark this page for more details.
As part of your loan modification agreement, after a certain time period (usually 5 years), your interest rate is subject to an adjustment. While every modification is unique, here’s a basic (and generic) overview of the process. The interest rate of your modification will:
- Adjust annually, usually by 1% or less until it reaches the interest rate cap. (The cap is not your original interest rate, but was the market interest rate for mortgages at the time you modified your mortgage.)
- Remain fixed for the life of the loan, beginning with the year it reaches the cap.
With the interest rate adjustment, you will have a new interest rate and a new monthly payment (contact your mortgage company for your specific payment information). You may also have additional adjustments to your interest rate and monthly payment until your rate adjusts to the cap.
- Review the letter(s) and all documentation from your mortgage company—they will have the complete details about your specific situation.
- Note your new interest rate, new payment, and the effective date of these changes. Don’t forget to pay the new amount on the effective date and be sure to update any applicable automatic bill pay/electronic billing.
- Contact your mortgage company immediately if you are concerned (or anticipate challenges) with your new monthly payment—go to the Get Help tab for more information on mortgage assistance.
We remain committed to helping homeowners. If you are worried about the new payment amount, resources are available to help. Don’t delay—the sooner you take action, the more options you may have. You can:
- Contact your mortgage company to review the changes to your modification and discuss payment options.
- Contact the Homeowners HOPE ™ Hotline (1-888-995-HOPE) to request Making Home Affordable (MHA) help. Or, contact a HUD-Approved Housing Counseling Agency (www.HUD.gov) for financial and budgeting assistance as well as to find an approved housing counselor.
- Contact Fannie Mae's housing counseling services for additional mortgage assistance programs.
What is an interest rate adjustment and why is it adjusting now?
When you modified your mortgage, your interest rate was significantly reduced below the market interest rate (this is the rate at the time you modified your mortgage). As part of the modification process and the terms of your loan, after a certain amount of time (usually 5 years), your interest rate will begin to adjust. It will continue to adjust until reaching the interest rate cap.
What’s changing?
Your interest rate and monthly payment will change each year until your modified loan reaches its interest rate cap. After that, your rate is fixed for the life of the loan.
How does the adjustment work?
Let’s use a simple example to illustrate how this works. This is an example only—your loan terms will be different.
- Example:
- Your current modification interest rate is 3%.
- The interest rate cap is 5% (remember, this was the prevailing 30-year fixed rate for conforming mortgages at the time you modified your mortgage).
- Your loan—per the terms—adjusts by a maximum of 1% every year until it reaches the cap. Therefore, your loan will:
- Adjust 1% this year to 4%.
- Adjust 1% next year to 5%.
- Remain fixed at 5% for the remaining life of the loan (since 5% is the interest rate cap, this would be the final adjustment).
What will my interest rate and monthly payment adjust to?
Your mortgage company should have sent you a letter(s) detailing the adjustment and providing you with your new interest rate and payment amount. Contact them immediately if you did not receive the letter and/or to discuss your payment information.
I’m concerned about my new monthly payment, what options are available?
If you anticipate difficulty with the adjustment to your monthly payment, contact your mortgage company right away to review your options. You can also contact the Homeowners HOPE™ Hotline (1-888-995-HOPE) to request Making Home Affordable (MHA) help. Or, contact a HUD-Approved Housing Counseling Agency (www.HUD.gov) for financial and budgeting assistance and to find an approved housing counselor. To request help from the Fannie Mae Mortgage Help Network, click here.