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Michael Gonzalez
Michael Gonzalez, Lawyer
Category: Real Estate Law
Satisfied Customers: 60
Experience:  Managing Member at Perez-Mena & Gonzalez, LLC
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We had a mortgage modification in August 2014 lowering our

Customer Question

We had a mortgage modification in August 2014 lowering our interest only mortgage from 10.375% to 2% for a period of 2 years. I just received a letter from the lender telling me our new interest rate is 3% raising our monthly payment from about $650 before escrow to $2400 before escrow per month. During the course of the modification our principal did not decrease. Is this legal?
Submitted: 7 months ago.
Category: Real Estate Law
Expert:  Michael Gonzalez replied 7 months ago.

Hello and welcome to JustAnswer. Please note: This is general information for educational purposes only and is not legal advice. No specific course of action is proposed herein, and no attorney-client relationship or privilege is formed by speaking to an expert on this site. By continuing, you confirm that you understand and agree to these terms.

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.

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