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Q. We re-financed our home 2 years ago so the payment would be more affordable. At the time we did not understand exactly what an adjustable rate mortgage meant. The broker told us the rate might go up later but that was not likely to happen since the rates were so low and that if they did we could always re-finance again so we would not have to worry about it. Our adjustable rate mortgage is scheduled to reset within the next few months. We feel sure the house is worth less than we owe so re-financing again is not likely to work for us. What happens at that time with the present mortgage holder?
A: Adjustable rate mortgages are set for certain periods of time and then the rate changes. Your rate will adjust based on the terms in the mortgage you signed at the inception of the loan.
Your present note holder or servicer is required to make the adjustments in strict adherence to the terms in your original documents. The frequency of the change as well as changes to the interest rate and caps should all adhere to the terms set forth in your note. You might pull out the original document and check to verify that they have, in fact, followed the guidelines there. If a mistake has been made you should bring it to the lender’s attention as soon as possible.
In the event the change in your interest rate will create a hardship in your ability to continue making scheduled payments, then consider the possibility of requesting a modification to the terms of the loan. There is a possibility that you might qualify for a reduction in the rate, or perhaps be able to have the loan converted to a fixed rate in order to keep from falling into default.
You should expect the lender to take a close look at your finances and have you to complete numerous forms and provide information on your finances to document your current situation and project your ability to maintain the payments with a new, adjusted rate. It is not a given that you will be able to get the rate changed, but it is certainly worth looking into.
Most lenders will at least consider a modification if you can demonstrate funds sufficient to make a reduced payment but cannot keep payments current at the higher interest rate. Check with the loss mitigation department of your financial institution if you are currently in default. Otherwise, you may talk to someone in customer service, but the reality is that seldom will you be offered any help unless you have already missed a mortgage payment.
I didn’t tell you to miss a payment; I said “seldom will they help you unless you have already missed a payment." Point of clarity: Loss mitigation is the correct department for someone who is already in default on their loan and customer service helps folks, or answers questions, when you are still current. The new stimulus package has a provision for banks to consider a modification “if default is likely”. We’ll have to wait and see whether banks actually do that.
Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.
(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)
A: Adjustable rate mortgages are set for certain periods of time and then the rate changes. Your rate will adjust based on the terms in the mortgage you signed at the inception of the loan.
Your present note holder or servicer is required to make the adjustments in strict adherence to the terms in your original documents. The frequency of the change as well as changes to the interest rate and caps should all adhere to the terms set forth in your note. You might pull out the original document and check to verify that they have, in fact, followed the guidelines there. If a mistake has been made you should bring it to the lender’s attention as soon as possible.
In the event the change in your interest rate will create a hardship in your ability to continue making scheduled payments, then consider the possibility of requesting a modification to the terms of the loan. There is a possibility that you might qualify for a reduction in the rate, or perhaps be able to have the loan converted to a fixed rate in order to keep from falling into default.
You should expect the lender to take a close look at your finances and have you to complete numerous forms and provide information on your finances to document your current situation and project your ability to maintain the payments with a new, adjusted rate. It is not a given that you will be able to get the rate changed, but it is certainly worth looking into.
Most lenders will at least consider a modification if you can demonstrate funds sufficient to make a reduced payment but cannot keep payments current at the higher interest rate. Check with the loss mitigation department of your financial institution if you are currently in default. Otherwise, you may talk to someone in customer service, but the reality is that seldom will you be offered any help unless you have already missed a mortgage payment.
I didn’t tell you to miss a payment; I said “seldom will they help you unless you have already missed a payment." Point of clarity: Loss mitigation is the correct department for someone who is already in default on their loan and customer service helps folks, or answers questions, when you are still current. The new stimulus package has a provision for banks to consider a modification “if default is likely”. We’ll have to wait and see whether banks actually do that.
Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.
(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)
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