If you received a loan modification under the 2009 Home Affordable Modification Program (HAMP), beware!  Your mortgage payments are about to increase.

Earlier this year, the feds issued a quarterly report entitled the Special Inspector General of the Troubled Asset Relief Program, or (SIGTARP), stating that around 782,748 homeowners who participated in HAMP will eventually see their monthly mortgage payments raise by approximately $200 per month.

Many will be rightly surprised by this increase.  That is because the 2009 HAMP program provided financial incentives to lenders in exchange for their agreement to “permanently” modify their borrower’s interest rates.  What many didn’t realize at the time was that “permanent” meant only five years according to the program’s definition of the term.

So how much can you expect your rate to increase?  According to Mark McArdle, chief of the Treasury’s Homeownership Preservation Office, “the maximum rate depends on the modification year and ranges from a median of 3.5% in 2013 to 5% in 2009.  “After all the interest-rate adjustments, 92% of [participating] homeowners will have an interest rate at or below 5%.”

You can expect some advance warning.  The Treasury requires mortgage servicers to provide interest rate increase notices no less than four months in advance.  This initial notice must be followed up with another interest rate notice increase about 60 to 75 days in advance of the first reset.

Please prepare yourself accordingly and feel free to contact me if you have any associated legal questions or concerns.