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Black Knight Mortgage Monitor: 40% of Modified Loans Facing Resets are Underwater

When the housing market unraveled back in 2008, one of the quick-fixes promoted by the Obama Administration was loan modification, specifically through the Home Affordable Loan Modification Program.

Those facing foreclosure in Miami may be familiar with the fact that this program offers reduced interest rates for homeowners – but only for a limited time. And now, for many, time’s up.

Those who first obtained relief through this program the first year it was available will now start to see their interest rates gradually increase. In some cases, according to the special inspector general for the Troubled Asset Relief Program, mortgage could rise by $1,000 a month.

Our Miami foreclosure defense lawyers recognize how potentially devastating this could be for many households. In fact, a new report by mortgage analysis firm Black Knight Mortgage Monitor indicates that 40 percent of the 2 million homes up for a reset of interests rates this year are underwater. That means the homeowner owes more on the home than what it is worth.

Another 18 percent of mortgage holders hold less than 9 percent equity in their homes.

In turn, these homeowners can’t simply sell or refinance once those higher rates kick in. If they tried, they’d have to bring cash to the table. That’s cash that many people don’t have, considering the economy failed to regenerate as quickly as many had hoped. That places them at higher risk of default and subsequently, a greater chance of battling a foreclosure.

This newest increase in payments may likely prove HAMP to be a delay of the inevitable.

Black Knight’s manager of loan data was recently quoted as saying research has proven that equity, or rather a lack of equity, is one of the main catalysts for mortgage default. Now, not only do these homeowners lack equity, but there is less a chance of them obtaining it, as their payments continue to soar. Inevitably, an increase of foreclosure filings is likely on the horizon.

Although we are technically no longer in a recession and the housing market as rebounded to an extent, housing analysts say there is strong indication that many of the borrowers enrolled in these programs aren’t much better of financially than they were five years ago when they first sought help to hang onto their homes.

The five-year limit on these modifications was set with the anticipation that the economy would bounce back more rapidly. Unfortunately, recovery has been slow. Unemployment may have fallen some and housing prices have climbed. However, income levels for the average household have remained stagnant since 2009.

Even before the rise of the interest rates, about one-third of those who enrolled in temporary interest loan modification programs defaulted.

Now, even those who aren’t technically underwater may still be at-risk. Many borrowers, the report indicates, are right on the cusp. The increase in interest rates could push them overboard.

We’re here to help.

If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.

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