Real Estate Law
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This sounds very similar to the loan modifications that where being offered by banks during the height of the foreclosure crisis called HAMP loans. These typically started with an interest rate of 2% then escalating to 3% and eventually 5%. I do not know if this is one of those types of modifications. To answer your question, the legality of these increases depends on the loan documentation you executed. There are numerous federal guidelines and disclosures regarding payments and interests designed to attempt to make clear what you should expect during the life of your loan. I would recommend consulting a local attorney with knowledge of consumer protection to determine if you loan documentation is in order.