What can I do about my ARM mortgage?

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5 years ago I entered the buying frenzy and signed an interest only ARM loan for about 5.5%. Well now my 500K house is worth 300K, the interest rate will soon be 12%, I have no equity (interest only) and Chase Bank appears unwilling or unable to give me any options to stay in my house. The man’s only suggestion, laughing as he said it, was to come up with 200K and a 20% down. So my question- what can I do?

  1. Reply
    April 29, 2011 at 11:31 pm

    find a renter to cover the mortgage while you get a cheaper place to live. ride it out. either that or walk away. what kind of loan do you have that is going 12% even if adjustable? at today’s rates? come on.

  2. Reply
    April 29, 2011 at 11:52 pm

    The question is can you afford the payment when it adjusts? Refinancing with another lender is out of the question, so unless Chase will give you a loan modification, you’re stuck with it. Was this a “zero down” deal?

  3. Reply
    Ryan M
    April 30, 2011 at 12:03 am

    At this point…..walk away. This is what happens when you enter into exotic financing arrangements during an obvious housing bubble. Next time, if you cannot afford the house with a traditional mortgage, then you know you cannot afford the house to begin with. Live and learn…that is all you can do at this point.

  4. Reply
    April 30, 2011 at 12:04 am

    If you like the house and can afford to make the payments I suggest you ride it out for a couple of years and hope the housing market makes a recovery. Most 5/1 Arms do not automatically jump to 12% at the end of the term. They usually are adjusted to % closer to the current market and increase periodically as the rates rise.

  5. Reply
    the kid
    April 30, 2011 at 12:19 am

    He was right. You can’t refi a house you are under water in, and you are about to be screwed by you rate. Sell the house.

  6. Reply
    April 30, 2011 at 1:06 am

    If you can rent the house for enough to cover the mortgage, that’s probably the best option. If not, then try again to negotiate with them. Point out that if they make it so you can’t afford to stay in the house they will have to foreclose on you and it will take a LONG time to do that and get you out (unless you live in Texas which can be as fast as 60 days), meanwhile you willl be paying zero (even if you mail in what you can afford, they won’t accept the payments because it hurts their foreclosure) and when they sell the house later, they will get 300K if that’s the market rate.

    You could also offer a short sale. They won’t want to do either of those things, but if you can’t pay the 12%, then they may not have a choice. If you can pay but just don’t want to, depending on the state they can go after you for the different, but not every bank does that anyway because it costs them money up front and if you declare bankruptcy it delays the foreclosure and eliminates the debt.

  7. Reply
    Use Your Noodle
    April 30, 2011 at 1:57 am

    Short sale
    Deed in lieu of foreclosure
    Cough up 200k and 20% down

  8. Reply
    Simpson G
    April 30, 2011 at 2:52 am

    You need a property attorney to help you go over your documents. Your ARM ~MUST~, by federal law, contain listed caps and it nearly unheard of for an 5/1 ARM to be allowed to adjust 6.5% up in one year. In fact, most loans have a 5-6% cap over their LIFETIME.

    I’d be stunned if this story were legit and correct. Adjustments are tied to indexes, and LIBOR, CMT, and COFI (the most commonly used indexes that ARMS are tied to) have all gone down since 2006.

    In fact, my 7/1 ARM adjusted last year and dropped significantly. My payment decreased 13%.

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