Attention ARM Borrowers: Contact Your Lender Before Higher Payments Put Your Home at Risk
Homeowners with adjustable-rate mortgages (ARMs) who are not able to make their monthly payment when the interest rate goes up should contact their lenders as soon as possible to discuss their options. That is among the main messages from the FDIC and other banking regulators for the millions of borrowers who have ARMs with very low payments in the early years of the loan that will sharply increase when interest rates reset.
Defaulting on a home loan means you can lose your home. The lender has the right to foreclose – to sell your home to raise money to pay off your debt – if you default. You would also severely damage your credit record, making it more difficult to borrow money or get a job or insurance in the future. Consider these steps to avoid that result.
Ask about refinancing or restructuring: While many lenders and loan servicers (companies that accept borrower payments and help administer escrow accounts) are writing or calling customers who face big rate increases about the possibility of refinancing or restructuring their loans, "I would encourage borrowers who anticipate having difficulty making payments to take the initiative and seek assistance even if they have not been contacted," FDIC Chairman Sheila C. Bair told the House Financial Services Committee on April 17, 2007.
That same day, the FDIC and other federal regulatory agencies issued a statement encouraging financial institutions to "work with homeowners who are unable to make mortgage payments," by modifying loan terms or moving borrowers from variable-rate loans to fixed-rate loans that may be available at a lower monthly cost.
To read the rest of this article please visit http://www.fdic.gov/.
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