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When Your Adjustable-Rate Mortgage Adjusts

By Elizabeth Weintraub Sacramento Broker

Real Estate Agent with Elizabeth Anne Weintraub, Broker DRE #00697006

November 30, 2007 03:10 AM

I don't believe lenders disclose enough. Sure, adjustable-rate mortgage borrowers sign two inches of documents at closing that tell them the ARM can adjust, how the rate can increase, frequency, cap and so forth, but I'd like to see borrowers sign and read a form with four numbers on the page:

Approximate unpaid loan balance at time of adjustment
Highest interest rate possible
New principal & interest payment based on that highest interest-rate increase (in 30-pt type)
Difference between new possible payment and present existing payment

Lots of borrowers are saying today that they did not understand what they signed. And it's quite possible that they are telling the truth. Which is a sad state of affairs when it comes to lender disclosures. Borrowers need things spelled out, step-by-step. It's not that they aren't smart enough to figure this out (OK, some of them aren't), but it's because they don't deal with this verbiage day in and day out like we do.

Read more about Mortgage Loan Adjustments.

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Georgia Weaver

Weaver Realtors - Storm Lake, IA

A Promise Made is a Promise Kept! 712-291-0118

Elizabeth,

AMEN! I completely agree, I also think financial institutions should have fiduciary duty like Realtors. I'm sure that got a l ot of BOOS from the money people out there. Math is a scary think for about 70% of Americans - that is a big number. When the first thing I hear is, "What will the monthly payment be and that's all the financial info they want is, I get nervous.

One way I have been addressing this problem is to give the Buyers several of my business cards - each fianncial institution they go to gets one. I have a reputation for "Shopping mortgages around," and getting the best deal. Once a banker knows the Buyers are working with me they usually give better rates, but I still shop the mortgage around. I know many Realtors use mortgage brokers - in our area most of our loans are originated from actual brick and mortar local banks that I have a relationship with. I highly recommend this, more BOOS, I like a face-to-face meeting and if there is a problem now or later the Buyer knows the person they will be talking to.

Nov 30, 2007 03:29 AM

Elizabeth Weintraub Sacramento Broker

Elizabeth Anne Weintraub, Broker - Sacramento, CA

Put 40 years of experience to work for you

I suggest that my buyers shop for rates, too, or at least compare lenders. Fortunately, I have an excellent mortgage broker to whom I refer business. She guarantees borrowers that she will beat any rate and terms they find, or she pays them. She hasn't had to pay anybody yet. She worked on one deal for me last month where the borrowers did not qualify at the lender she submitted the loan to because they had such a common last name, the credit reports were mixed up. As a result, the buyers could not close on time and were penalized by the REO lender for it. The mortgage broker paid for the late fees the lender charged and placed them in-house, eating the half-point difference in rate. I don't know too many mortgage brokers who would do that for borrowers, but mine did.

Nov 30, 2007 03:43 AM

Georgia Weaver

Weaver Realtors - Storm Lake, IA

A Promise Made is a Promise Kept! 712-291-0118

Elizabeth,

That's awesome, I would love to have someone like that, would you share her information or does she know of anyone in this area who will work like she does??

Nov 30, 2007 05:31 AM

Elizabeth Weintraub Sacramento Broker

Elizabeth Anne Weintraub, Broker - Sacramento, CA

Put 40 years of experience to work for you

Hi Georgia: Her name is Evelyne Jamet, and she works at Vitek in Sacramento. She can do loans in many other states, but I don't know which states. She deals with all the major lenders such as Wells Fargo, Countrywide, B of A, etc., and always undercuts their rates. She was so pushed to the wall on that last transaction. She paid for 5 or 6 days of lender penalties, paid the difference in rate and credited the appraisal fee back to the borrower. I feel bad that she didn't get paid her normal fee and had to kick in so much money, but she's extremely ethical. Her cell phone is 916.947.8800. It took me a long time to find a mortgage broker as great as Evelyne. She responds immediately to all requests, and I don't have a dog in the game for referring her.

Nov 30, 2007 05:39 AM

Kevin McGrath

Long & Foster Real Estate Companies- Fredericksburg/Spotsylvania - Fredericksburg, VA

Long & Foster Real Estate Companies

I agree, but I also think that it is a sad commentary on our society that a working man can not buy a house without being presented with a document that the average Joe can't understand. Yes - disclosure should be much more in depth, but if when you bought a house, if it was not this "War & Peace" document, maybe their eyes would not glaze over and they could become more invested in the process. It just seems like it has become much more complicated than it needs to be.

Sounds like you have got a great lender relationship there - that says alot about you and your business.

Take care

Nov 30, 2007 09:03 AM

Elizabeth Weintraub Sacramento Broker

Elizabeth Anne Weintraub, Broker - Sacramento, CA

Put 40 years of experience to work for you

It just seems like it has become much more complicated than it needs to be.

That's not because the product is more complicated, necessarily, it's because of the increased number of lawsuits filed. Actually, I'd like to see the disclosures become simpler. Like this is your mortgage payment now. On one page. In red. Then, this could be your mortgage payment two years from now. On one page, in red. Followed by "it might happen." In red.