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HAMP Tier 1 modifications included interest rate reductions to as low as 2% for the first five years to help homeowners avoid foreclosure. • The terms of the HAMP Tier 1 modification include a gradual interest rate step-up after five years. • Homeowners in HAMP Tier 1 modifications will experience a gradual interest rate increase, also known as a rate step-up, of 1% per year (maximum) until their rate adjusts to the market rate at the time of their modification. 


For some HAMP homeowners, interest rate step-ups will begin in the 3rd quarter of 2014 (October 2014), impacting approximately 30,000 HAMP homeowners by the end of this year, all of whom received modifications in 2009. Timeframe for Rate Step-Ups Approximately 80 percent of homeowners with a HAMP Tier 1 modification will experience at least one future rate step-up. The majority of HAMP homeowners will experience two or three rate step-ups.  The number of rate step-ups and the amount of the payment increase will vary depending on the effective date of the modification, whether the modification included principal forgiveness and other factors. Number of Interest Rate Step-Ups The maximum rate depends on the market rate at time of modification.  For 92% of HAMP homeowners this will result in a rate at or below 5%, well below the average 6.3% interest rate before their modification for most homeowners.  After all interest rate step-ups have occurred, the cumulative monthly payment increase for a typical loan will be approximately $200. Final Rate and Mortgage Payment Source: Treasury Notes blog “HAMP Rate Reset: Just the Facts” (3/12/14) Making Home Affordable | May 2014 10 • General economic conditions are improving, particularly home price appreciation and job growth. • Final interest rates are below pre-modification rates for most homeowners. • However, there are factors that may impact a homeowner’s ability to accommodate the payment increase:  Improvement in the economy has been uneven, and  Homeowners may have experienced additional hardship since modification (i.e., increase in expenses or decrease in income). • If a payment increase presents a challenge, homeowners should contact a housing counselor or their servicer immediately.