Courtesy of CNN.com
Cheap Obama mortgages to get more expensive
By Les Christie
@CNNMoney March 4, 2014: 11:37 AM ET
NEW YORK (CNNMoney)
Nearly 783,000 homeowners who had their mortgage rates
reduced under the government's Home Affordable Modification Program will see
their payments increase by an average of almost $200 a month in the next few
years, which will likely lead some borrowers to re-default, a federal watchdog
warned.
Launched in 2009, HAMP helped troubled borrowers by either
reducing the principal they owed or the monthly interest they paid, with many
receiving rates as low as 2%.
But modifications under the program remained fixed for only
five years and starting this month, the earliest borrowers in the program will
begin seeing their rates climb by 1% a year to a high of 5.4%, the Special
Inspector General's report on the Troubled Asset Relief Program (TARP) said.
As a result, some 33,000 borrowers are expected to see their
rates increase this year.
Currently, the median mortgage payment among these borrowers
is $773 a month. Once all rate hikes are factored in, their payments are
expected to climb to a median of $989 a month.
"We're already seeing alarming re-default rates and are
really worried that this could lead to more," said special inspector
general Christy Romero. "It will be a real challenge for people to pay the
higher amounts."
As of November 31, 359,000, or 28%, of borrowers with
HAMP-modified mortgages had already re-defaulted on their mortgages and nearly
100,000 more were deemed "at risk" of default, SIGTARP reported.
Four states, including California, Florida, New York, and
Illinois, accounted for half of all of the HAMP modifications that are expected
to see rates climb. Some borrowers, particularly in expensive coastal markets,
could see their mortgage payments climb by as much as $1,700 a month, SIGTARP
reported.
The rate increases will begin this year and run through
2021.
