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Will I still have an interest-only loan after a HAMP modification?

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Q: If I receive a modification under HAMP, will I still have an interest-only loan?

A: According to the regulations governing HAMP modifications, the answer is "no."

Your loan--whether an ARM which allows for interest-only (or other payments, such as a pay-option ARM) or a fixed-rate mortgage with an interest-only period--will be converted to a fixed interest rate, fully-amortizing loan when it is modified.

This is detailed in the administration handbook mortgage lenders use for HAMP under section 6, Underwriting (section 6.1.2.1), where it specifically notes "If a borrower has an ARM or interest-only mortgage loan, the mortgage loan will convert to a fixed interest rate, fully amortizing mortgage loan."

About the author:

KTGA 25-year expert observer of the mortgage and consumer debt markets, Keith Gumbinger has been cited in thousands of articles covering a wide range of consumer finance and economic topics in outlets ranging from the Wall Street Journal to the Bottom Line newsletters. He has been a featured guest on national broadcasts for CNN, CNBC, ABC, CBS and NBC television networks and has been heard on NPR and other national and local radio programs. Keith is the primary researcher and writer for HSH.com's MarketTrends newsletter and has authored or co-authored a number of consumer guides on mortgages, home equity, refinancing and more.

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