Bad Times Ahead for HAMP Rate Resets on Loan Modifications

If you pay your mortgage through a HAMP loan modification originated in 2009, be prepared to be hit with a major rate reset beginning as early as October of 2014. As I read the Treasury FAQ about Hamp rate resets, it became crystal clear why so many of my Sacramento short sales lately involve homeowners who have been approved by the HAMP program. My business of selling Sacramento real estate and especially short sales does not lend itself to helping sellers do loan modifications because, contrary to popular belief, I am not a lawyer. I am a real estate agent and I sell homes. To that effect, loan modifications affect my business only in a peripheral sense.

However, I vividly recall when the Home Affordable Modification Program, HAMP, was initiated by the government in 2009 to help homeowners stay in their homes. When it first began, many homeowners were rejected for HAMP and, having no other course of action, they turned to short sales, which meant eventually moving out of their homes, and not the preferred alternative. But over the years, the government and the banks got their acts aligned together or maybe the banks just figured out how to extract more money from the Treasury, and a large number of distressed homeowners received loan modifications.

One of the key qualifiers for the program was to be employed, so that left a lot of Sacramento homeowners in the dust. For those who managed to hang on by hook or by crook to a job, they probably were qualified for a loan modification. Like the bandage it is, though, a HAMP loan modification is only a temporary solution.

I advised people back then that doing a loan modification might be similar to putting a gun to your head and just not pulling the trigger for a few years. When you’re desperate, you’ll grasp at anything that keeps you in your home. I understand that. People tend to hope for the best. The sad thing is life over the years did not get proportionately better for many people in Sacramento. My husband, for example, lost his job in journalism in 2008 and has yet to recover.

The flaw in the HAMP program, if you will, is the fact interest rates reset after 5 years and every year thereafter. So if you took out a loan modification in 2009, your rate could go up by 1% and your payments could jump by $200 this October. If you took out a loan modification in 2010, you’ll be hit next year. And the rate continues to reset year after year. It doesn’t get any better than you have it right now.

Which is why some sellers will find they can no longer afford to pay their mortgage nor stay in their home due to the HAMP rate reset, and they will turn to the best Sacramento short sale agent they can find, which will be me. I have sold more short sales in the Sacramento area than any other real estate agent since 2006. I know how the banks negotiate, how to get your short sale approved and, best of all, you’ll be done with it now and forever. There is no out-of-pocket cost to you, all fees are paid from proceeds at closing. You can call the #1 short sale agent in Sacramento: Elizabeth Weintraub at 916.233.6759, at Lyon Real Estate.

The good thing — if there is such a thing as a good thing when it comes to short sales — is the fact that if you were approved for a HAMP loan modification, you are practically guaranteed to be approved for a short sale.