Freddie Mac has announced that the base interest rates on Freddie Mac Standard Loan Modifications and Streamlined Modifications will increase for the first time in several years effective April 14, 2015. See here. Effective April 14, 2015, the base rate will be 4.125%. Over the past 6 months, these rates have actually been dropping from 4.5% (for the period from October 14, 2014 – November 13, 2014) to 4.0% (effective through April 13, 2015).
The base rate for Freddie Mac Loan Modifications for mortgages is important when seeking a loan modification on Freddie Mac mortgages. If the homeowner is successful in navigating the loan modification application process (or is offered a “streamlined modification”), the base interest rate is used to calculate the modified monthly payments. The interest rate is also an important factor in determining the homeowner’s ability to obtain a modification of their mortgage payments as it affects the calculation of “affordability”.
Typically, both the Freddie Mac Standard Loan Modification and Streamlined Modification are sought by homeowners who are facing mortgage foreclosure. While the changes in the interest rates may appear minor, they can have a significant effect on the prospective monthly payment under a loan modification and a homeowners ability to avoid the loss of their home.
According to data which was provided by Experian, the average mortgage balance in New Jersey was approximately $203,000 in 2014. See here. Based on that information, here is how the applicable interest rate on a loan modification can affect your monthly payment (based on a fixed rate for 30 years and does not include escrow calculations for property taxes and insurance).
$203,000 @ 4.0% = $969.15/month and total payments of $348,895.10.
$203,000 @ 4.125% = $983.84/month and total payments of $354,182.02.
$203,000 @ 4.5% = $1,028.57/month and total payments of $370,285.62.
With recent announcements by the Federal Reserve that interest rates would be increasing in the near future, you would assume the rates on loan modifications may also rise.
For any homeowner facing mortgage foreclosure or seeking a loan modification, the complex nature of the application process and the importance of these issues to avoiding the loss of your home suggests that they consult an experienced attorney to review both the legal process and potential options. Too often homeowners have consulted with us after paying thousands of dollars to “loan modification experts” who tell them “no problem” or offer guarantees and promises. Mortgage foreclosure is a legal issue and should be reviewed with an experienced New Jersey Foreclosure Attorney. Homeowners should seek honest advice and counsel and not promises and guarantees.
