I just recieved a call today from a client i did a jumbo interest only loan 3 years ago at a rate of 2.875% wow remember those rates? My client told me they received a letter from their loan servicer explaining the new payment. It showed the current payment of 1500 per month would become 3200 per month. Now i start to scratch my head because without using a calculator i can figure if 2.875% adjusts up 2% to 4.875%, the new payment could in no way more than double.
take notice people!!!!!!!!!!!!!!!!!!
Many investors - read the mote and adjustable rate rider's - in addition to adjusting the rate up by calculating the margin + the index do this === they take the difference between the interest only payment ( this is typically why the loan was taken out and the payments all our clients are choosing to make ) and the fully amortized payment, and calculate that figure back into the new "payment".
Originators need to be prepared for these phone calls. I guarantee that there are plenty of seasoned originators and quite a few pros that do not understand how these loans adjust.
Borrowers should be contacted and informed of their pending "payment" adjustment and given the option to refi into a fixed rate. I guarantee the vast majority of borrowers have not been informed of how these loans adjust.
Lewis Poretz
SERVING A COMMUNITY
means being a part of it
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