Government Loan Modifications

Brief

Government Loan Modifications

What Happens When Interest Rates Rise?

Abstract

In this brief, the second in a series prepared by HFPC researchers with support from the mortgage servicing collaborative, we examine government loan modification products available for loans insured by the Federal Housing Administration (FHA), the US Department of Veterans Affairs (VA), or the US Department of Agriculture (USDA). We explore how FHA, VA, and USDA borrowers who fall behind on their payments are unlikely to receive adequate payment relief when the market interest rate is higher than the original note rate. We argue that, with some changes to the loan modification options at the FHA, VA, and USDA, current and future delinquent borrowers in rising interest rate environments could be better served.

Centers

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