We Can’t Refinance Our Adjustable Rate Mortgage, What Are We To Do?

What About Those ARMs?
The fallout from (ARMs) Adjustable Rate Mortgages has left some borrowers wallowing in incredible uncertainty.

Many ARM borrowers didn’t fully comprehend when they signed on the dotted line that their mortgage payments would climb anywhere from 2 to 6 percentage points, causing their monthly payments to skyrocket.

Depending on your Adjustable Rate Mortgage loan agreement, the increases can take place every six to 12 months.

Meaning that a borrower could watch in horror as their payment escalates from $900.00 per month to a staggering $1300.00 per month in less than two years.

As the federal government investigates what brought about the traumatic issues in subprime lending, one thing is clear: it just may get worse before it gets better. Numerous mortgage lenders are filing bankruptcy while others have abruptly stopped offering the most popular type of ARMs. Consequently, credit-challenged borrowers suddenly have fewer loan options.

Says Deborah Goldstein, executive vice president of the Center for Responsible Lending, "Many borrowers are not going to be able to refinance." The consumer watchdog group has criticized loose standards for subprime mortgages, which are home loans for people with problem credit -- generally, with credit scores below 620. As payments have risen, borrowers have been forced to consider refinancing only to find out they cannot because:

(a)   The property value has dropped

(b)   They don’t have enough equity

(c)   They are in a negative equity situation

(d)   Their credit score prohibits them from re-financing

(e)   They have insufficient income to qualify for conventional financing

So What Is a ARM Borrower To Do?

At the REO Dr we believe that education and information are the foundational keys to converting a bad deal into a good one. Having shared that, your first step should be to seek counseling and to that end we recommend: (CCCS) Consumer Credit Counseling Service of Greater Atlanta Inc. The CCC is a nonprofit service that provides Housing Counseling, Debt Management and Credit Counseling. Their counselors can help you establish the appropriate strategies to help you resolve your Adjustable Rate Mortgage situation. This should be your first step to getting out of this economic whirlwind.

What Not To Do

Don’t wait until you get behind on your mortgage. Once you are in the arrears, your options decrease dramatically and time begans to work against you. As the mortgage payments pile up, so do the late fees, property inspection fees and miscellaneous fees that come with late mortgage payments.

Contact Your Lender Immediately

Be proactive and contact your lender. This puts you in a better position to negotiate. Please note, lenders don’t want to foreclose. The more borrowers they foreclose on, the closer that lender comes to filing bankruptcy or being shut down by the Federal Government.

We had a case in June of 2007 in which a borrower was headed into foreclosure due to her adjustable rate mortgage payment increasing. In short, her lender worked with her by repackaging her loan to a fixed rate, put the arrears and associated fees on the back end and made her payments affordable. They only did that because she contacted them when she foresaw the financial storm on the horizon. Taking the step of immediately contacting your lender could be your saving grace.

In Summation

First things first, contact the Consumer Credit Counseling Service of Greater Atlanta Inc. Utilize their services to come up with a strategic plan to help you re-gain control of your ARM. Second, with your plan in hand, contact your lender and start the process of regaining your peace of mind and sanity.

Brad Pierce is a fulltime Real Estate Investor specializing in short sales and helping subprime borrowers recover from the subprime mortgage meltdown. With over 15 years of experience, Brad has quietly helped thousands of individuals experience their dream of home ownership.