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what happens after 5 years in loan modification with the payment amount or interest rate?

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January 10 2010 - Rosemount
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Profile picture for pattyplum
I have an MHA/HAMP perm modification through BOA. For years 1-5, the interest rate is 2%, increasing 1% per year until year 8 when it hits 5% where it stays until year 27, the end of the term.

This is pretty typical of how MHA mods are structured, e.g., stepping up 1% a year after year 5. Most are settling in somewhere in the neighborhood of 5%, give or take half a percent.

BOA is mirroring this structure in many of the in-house mods that they are offering.

Check out www.loansafe.org for some really great information on all the banks and modifications in general. It helped me tremendously in achieving my perm mod...which I did myself...without the "help" of "loan modification specialists."

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February 06 2010
Under HAMP, it goes up to the prevailing lowest rate at the time you got the modification.  If the current market rate is 4 7/8%, than in 5 years, that is your rate, even if the prevailing rate at that time is 7%.  The way it goes up to that new rate may be incrementally, to assist in the transition or it may be abrupt.  Either way, loan modifications are a good alternative for many of us.
Good Luck
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January 11 2010
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thank you everyone for helping me. you have helped me understand more than anyone at the bank has. (:
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January 11 2010
The details will be spelled out in writing after the 3 month trial period (if there is one) and when you enter the permanent phase -- sometimes it's better and sometimes it reverts back to the original definition of your loan. But it's never worse than what you had.
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January 11 2010
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My old rate was around 6.7. My new loan gradually increases after 5 years it goes from 2%,to 3% 4% and caps off year 8-30 at 4.5% which is fantastic. No increase in years.
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January 11 2010
I assume you are talking about the government programs, Hamp.  Those are usually 5 year fixed and then will eventually adjust back to your current rate.  Your loan mod papers will tell you exactly the terms.  There is not a set gradual increase in payments, it is up to the bank and how they decide they want that to happen.
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January 10 2010
 
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what happens after 5 years in loan modification with the payment amount or interest rate?
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Latest answer by pattyplum
February 06 2010 | 6 answers
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