How to escape a mortgage mess
If payments on your adjustable-rate mortgage are about to go up, act now. Plus, tips for mortgage shoppers.
By Mark Trumbull, The Christian Science Monitor
From CSM and MSN
Stress in the nation's mortgage industry is putting a financial squeeze on home buyers and homeowners alike.
Buyers are finding it harder to obtain home loans as lenders tighten their credit standards or even go out of business.
Homeowners with adjustable-rate mortgages (ARMs) face a double whammy. House prices are falling even as their monthly home payments adjust upward in a big way. So when ARMs reset, many may find they can neither make their payments nor sell the house for enough money to cover the loan.
With October identified as a peak month for such scheduled resets, can this group of homeowners escape from this mortgage mess?
Perhaps.
Today's credit environment certainly isn't as easy as it was a few years ago, when lenders often made loans that put themselves and home buyers at higher risk. Back then, as home prices rose, so did the popularity of loans with "teaser" interest rates that lasted only a couple of years. Subprime lending soared as lenders issued riskier loans, ignoring the elevated danger of default.
Now homeowners faced with the prospect of home loans resetting sharply higher are seeking solutions. Often what's needed is patience, persistence and a willingness to seek help.
Consider the recent experience of one Germantown, Md., couple who nearly lost their home. Vaughn and Candice bought a large brick-front colonial five years ago. A couple of years later, they refinanced their mortgage, allowing them to tap their home's equity to help pay college bills for two of their children. Their monthly mortgage payment was $4,000 a month. Everything seemed to be going well.
"We were fine," says Vaughn, who asked that his family's last name not be used in this story to protect their financial privacy
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