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A new report from the Tarp inspector general says the Treasury Department failed to analyze its own data to determine which borrowers were most at risk of losing their homes to foreclosure after receiving government support.
July 24
The Treasury Department has directed mortgage servicers to notify borrowers 120 days in advance of upcoming increases in monthly payments on loans previously reworked through the Home Affordable Modification Program.
Some borrowers' monthly bills could rise by as much as $1,700, although the increases will be gradual and the national median increase will total around $200, the department says. Treasury officials want to ensure borrowers have plenty of advance notice of a reset and counseling will be available if necessary.
"Treasury will maintain its oversight of participating servicers," Mark McArdle, the chief of Treasury's Homeownership Preservation Office, said in a March 12 note to servicers. "We will monitor the interest rate resets to ensure that if signs of homeowner distress arise, servicers are ready and able to help by providing loss mitigation options and alternatives to foreclosures."
Many distressed homeowners saw their interest rates reduced to 2% and the median monthly payment cut to $773 under the HAMP program, which was launched in 2009.
There are currently 782,748 HAMP active mods that are slated to complete a multi-year reset process by 2021.
An estimated 30,126 HAMP mods will start to reset this year and the interest rate will go up one percentage point per year until it adjusts to the rate agreed upon at modification. The reset rates will range from 4% to 5.4%, according to a
The multi-year median monthly payment increase will be $196 when the HAMP reset process is complete. However, the maximum payment increase could be $1,724 in places like California, compared to $789 in Arkansas.
Ten states and the District of Columbia will "face mortgage payment increases that are more than the $196 national median," the inspector general's report says.
