If you qualify for loan modification rather than refinancing, your conventional, Fannie Mae or Freddie Mac loan has a trial period of 90 days and another time period of five years.

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Obama Mortgages After Five Years of Loan Modification

Are you applying for an Obama mortgage? Your first hurdle is to pass the initial screening that determines which part of this homeowner bailout program you qualify for--an Obama mortgage refinancing plan, or loan modification. If you qualify for loan modification rather than refinancing, your conventional, Fannie Mae or Freddie Mac loan has a trial period of 90 days and another time period of five years. Once you've passed five years on your loan modification and begin paying on year six, your Obama mortgage may be subject to interest rate increases depending on the terms of your modification.

THE 90 DAY TRIAL

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. You can't be late, and you can't miss a payment during this trial.

FIVE YEARS OF FIXED INTEREST

Once your for loan modification trial period is over and you're approved for permanent loan modification, the five year time period begins. You should keep track of the “anniversary dates” for your homeowner relief loan modification. Once five years have passed your mortgage could be subject to interest rate increases. Under the terms of the Obama mortgage and Home Affordable homeowner relief program, if you had your interest rate modified to an amount below the market rate, your mortgage will get an interest rate increase of no more than one percent per year. That yearly increase may continue until the interest rate reaches a rate cap--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.

Once your interest rate reaches that rate cap, the modified rate will never go higher. 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.

If you don't understand how these interest rate changes may change your mortgage payments, ask your loan officer to explain the terms to you. If you are due for interest rate increases after the five year period, you should also calculate how that increase affects your monthly payment. Plan ahead, and you'll stay current with your mortgage payments once the interest rate increases begin.

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