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Once you are initially approved for an Obama mortgage loan modification, you have a 90-day trial period to get things started. Your interest rate may increase in year six.

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News and Updates for Homeowners

The Obama Mortgage After Five Years of Loan Modification

April 9, 2009 - If you are considering applying for an Obama mortgage, the first thing you need to do is pass the initial screening to determine whether you're a good candidate for an Obama mortgage refinancing plan or loan modification. If your circumstances dictate loan modification rather than refinancing under Home Affordable, your conventional, Fannie Mae or Freddie Mac loan has two distinct periods of time you should be aware of.

Once you are initially approved for an Obama mortgage loan modification, you have a 90-day trial period to get things started. You must make all payments on time during the 90 days in order to be approved for a "permanent" loan modification program.

Once your Obama mortgage trial period for loan modification is over and you've been given your permanent loan modification, the second time period begins. This one is just as important as your 90 day trial period, but lasts much longer and is easy to forget about once you've settled into making your Obama mortgage loan modification payments. But it's very important to keep track of the "anniversary dates" for your loan; after five years have passed your mortgage may be subject to changes based on the nature of your loan modification.

Under the terms of the Obama mortgage and Home Affordable homeowner relief program, your interest rate may increase in year six. If you had your interest rate modified to an amount below the market rate, the Obama mortgage rules allow an interest rate increase of no more than one percent per year. These increases can continue until the interest rate reaches a rate cap which should be spelled out in the agreement you signed as part of the loan modification paperwork.

The interest rate cap is the same amount as what the Home Affordable official site describes as the "prevailing market interest rate" on the day your Obama mortgage loan modification agreement is signed.

What does this mean for you as a borrower? Once your interest rate has reached the limit as described in your paperwork, the modified rate will never go higher than that amount over the rest of the payments you make. For those who got an Obama mortgage loan modification interest rate at the prevailing market rate or higher, the rate is fixed for the lifetime of your mortgage.

Be sure you fully understand the interest rate changes that may affect you in the future. If you are due for interest rate increases after the five year period, calculate how that may affect your ability to pay and what savings or other financial planning you need to make to stay current with your mortgage payments once the interest rate increases begin if applicable.