A few years ago, home loan modifications helped hundreds of thousands of homeowners keep their homes. The loan modification process essentially lowered the interest rate for home loans, therefore lowering the monthly payment to a manageable amount. Four states, including Florida, account for approximately half of all homeowners who turned to loan modification programs during the height of the recession. As those loan modifications age, homeowners may be surprised to know the interest rate change is not permanent.
Initial loan modifications approved in 2009 are now at the five-year mark. After five years, the interest rate is subject to start to rise again. The increase may only be at a rate of one percent each year. However, it can continue to rise until it reaches the rate the original loan was at the time it was modified.
For those who are still struggling and turned to loan modification for relief, any increase in the rate and the payment may be a financial strain. It is estimated that the median amount of the monthly payment increase may be $242. To further express the trouble still plaguing homeowners even after a loan modification, a recent report states that of those who received a government loan modification in 2009, four out of 10 ended up defaulting on the loan again.
The ability to modify a home loan has helped thousands of Florida homeowners ride out the tough recession. However, as those rates are subject to change, those very homeowners may need help again. There are many options on the table that homeowners may benefit from learning about aside from loan modification, such as bankruptcy. Bankruptcy can help a homeowner keep their home and also help them get a fresh financial start.
Source: pnj.com, Higher rates loom for some modified mortgages, No author, Jan. 29, 2014