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Three ARM/Pick a payment on two houses!
This week we had the oportunity to meet Hispanic homeowners who spoke very little english who wanted their home valued.  I and a Spanish speaking Realtor met with them and told them that their home was worth $240,000.  The mortgage on their home is $262,000 with $1180 per month payments.
Since that did not compute I examined the mortgage documents and discovered they had been paying less than the interest and their payments were about to increase to $2450pm.  We further asked where they got the $14,000 to put down and they said that they put a second mortgage on their other home and rented it.  The rent barely covered the payments and when I understood the terms of the other two mortgages it transpired that the first had increased from $181,000 to $195,00 and both mortgages were soon to go to a greatly increased payment schedule.  The home is worth perhaps $200,000.
Did they understand what they were getting into?  My belief is No and Yes.  They obviously did not know the details of the mortgages and the Hispanic Realtor who represented them did not attempt to do so.  The Realtor just told them to refinance at their convenience.  On the other hand ... more

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