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Dark Clouds Ahead for Homeowners Who Took Part in HAMP Program

Some dark clouds are about to appear on the horizon for nearly half a million homeowners nationwide who took part in the HAMP program. Metaphorically, those approaching clouds are coming in the form of rising mortgage payments. This includes thousands of struggling Illinois homeowners who depended on the government’s assistance to get them through the housing crisis, but are now facing the possibility of not being able to count on that support much longer. Combined with higher homeowners insurance costs and rising interest rates, these homeowners could easily be caught in a financial squeeze.

Over the next several years, local homeowners who signed on to participate in the federal program that lowered interest rates on their residential mortgage will look at higher payments as those initial low rates reset. Adding to the pain, another federal program specifically designed for residential borrowers to aide them to refinance their homes expires at the end of the year. Furthermore, funding for an Illinois Housing Development Authority (IHDA) program that subsidizes mortgage payments for homeowners struggling to make their payments is running out.

Launched in 2009 to assist homeowners following the housing bust of 2008, one of the largest resources was the federal Home Affordable Modification Program (HAMP). Under the program, homeowners who couldn’t make mortgage payments were assigned interest loans as low as 2 percent. Unfortunately, those introductory rates were only for a period of 5 years and are set to rise 1 percent per year until they reach pre-HAMP levels.

Of course, the result will be mortgage payments that are possibly much harder to make starting this year. While the national average first monthly payment increase is expected to be around $95, in certain parts of the country, it could be substantially more. With fewer resources to help people and thousands of homeowners facing rate increases, a potentially serious issue could be around the corner.

The rising rates began for some homeowners last year, but those affected by the increase will jump in 2015 due to a wave of people taking advantage of the assistance program in 2010. And, although the state of the housing market is recovering somewhat, experts are apprehensive, fearing the higher payments could greatly affect homeowners whose financial situations haven’t improved a great deal over the past five years.

According to statistics, as of July 2014, approximately 184,000 Chicago-area residents had taken part in the Home Affordable Refinance Program. That, in itself, could create a problem as it expires at the end of this year. With so many programs running out of funds or coming to an end, such as the Illinois Housing Development Authority, which has provided $416 million to subsidize mortgage payments for more than 13,000 Illinois homeowners by using money through the federal Hardest Hit Program, participants could be susceptible to renewed hardship.

The program, aimed at helping homeowners who were unemployed or underemployed, by providing subsidies to borrowers totaling as much as $35,000 over 18 months, was terminated in 2013 and subsidies for the majority of recipients will end in June.

Those barely getting by making their mortgage payments, even with government assistance could, literally, be back in the same boat as they were prior to HAMP. And, once all programs are no longer available, one has to wonder what’s going to happen next.

Regardless of your current situation, homeowners insurance is a necessity to protect your home and belongings. So make sure you’re getting the best rate on your homeowners insurance. Why not get a free homeowners insurance quote today?

If you participated in the HAMP program, are you worried about what’s going to happen next? Feel free to share your thoughts in the comments section below.