Q: Considering that many unconscionable lenders have placed unsophisticated and trusting folks into crummy and risky loans -- often at higher rates than necessary -- and most likely put themselves in fat city in the process, I was wondering if you have heard of any banks or financial institutions that are in the process of creating new mortgage products that will "rescue" any of these borrowers?
I am a California Realtor who has been licensed since 1994 and even I am in a crunch with an option ARM loan I took out in 2004. I consider myself well educated, but I am looking at a reduced income stream this year as the market softens, and at the same time I am suffering the payment-rate creep due to the adjustable interest-rate feature in my loan.
I have a relatively high credit score and do not consider myself subprime material, but realize that due to the current tightening credit and rising rates, I may not be able to get out of this loan to something more comfortable as switching to a fixed rate loan will raise my payment beyond what I can afford.
Watching the news lately I began to think that if I am in this quandary, even with good credit, then I imagine there are many others like me out there too. Without the Fed lowering rates, the only other solution to my pain (and others as well) that I can foresee is if a new mortgage product is created -- perhaps something like a "pick-your-payment loan" with a fixed rate and an adjustable term.
I at least consider myself fortunate to have more than 50% equity in my home. But since values seem to falling, I don't know how long that will last if I continue to defer the interest and some of the principle when some months I must elect to only make the minimum payment? Cid Young
A: I haven't heard of anything yet from the rocket scientists who create these crazy mortgages. But you never know what's on the drawing boards until new products are announced.
Until then, let me suggest that you give your current lender a call, tell the company of your situation and see what products it has available that might ease the pinch. Many lenders are willing to work with borrowers who find themselves in a situation like yours, especially if you are a good customer who has been paying on time or has other loans, credit cards or another kind of relationship with the firm. They want to keep people like that on their books, so they will work extra hard to keep you happy.
Absent that, hang in there. Maybe some lender will come to your rescue with the kind of loan you are talking about.
Nationally syndicated columnist Lew Sichelman has been covering the housing market for 35 years.
