Is your mortgage about to gain 50 pounds?

[Chief Tutor]

Right now thousands of people are in trouble and don’t even know it. Why? Let me explain. During the last fives years, adjustable rate mortgages (or ARMs) were all the rave. Chances are you probably got one because of the easy, low payment. But right now these ARMs are about to adjust…

Is yours about to? If so, your payment can skyrocket to THREE times what it is now. And this could catapult you into foreclosure – something I know you definitely don’t want to be in.

I suggest you give me a call and let me go over your to loan to see how bad it's going to get. If it turns out that you won’t be able to handle the new paymnet, I can help you get into a fixed rate mortgage so this never happens to you again.

To be frank, you at least owe it to yourself to see what you mortgage future holds. The call won’t cost you anything, but not calling could cost you everything.

It’s up to you now. But between me and you, I think you'll reply.

Warm regards,

Bruce Waller

[promortplanner]

Bruce,

How you doing? I have to agree and disagree with you on your points about adjustable rate mortgages.

Yes, thousands of people are potentially in harms way with the mortgage products they got themselves into here in the last five years. Half of that I regretfully say was probably due to the fact of the borrower working with inexperienced loan officers who didn't have the experience or knowledge to put them in the right loan. I call these loan officers "order takers" who have helped reduce the image of today's loan officer to the same category not far from a used car salesman.

Adjustable rate mortgages has made home ownership possible for many who otherwise would have been locked out of the market at a great time in American history when many areas of the country was experiencing double digit gains in appreciation for a few consecutive years running. Free money!!! Thus contributing billions of dollars to the American economy. In that, were people living well beyond their means and using their homes as ATM machines for cash. Refinancing time after time after time like blistering idiots. Guns don't kill people - stupid people with guns kill people.

A few statistics:

An estimated 40% of the outstanding loans today are adjustable rate mortgages with 2 trillion dollars adjusting this year. Another 2 trillion in adjustable rate mortgages will probably be written this year again.

As for payments increasing by three times:

Not so likely! Many of these loans have shock features in place designating at the time of origination how much the payment can increase in the first adjustment period, how much per year after the first adjustment, and how much over the life of the loan.

What you should be doing is educating your clients on how to determine exactly how much there payment will actually increase instead of scaring them into thinking their payment will increase 3 fold. It's very simple for a borrower to go back to the note they signed and look at qual rate, margin, and index their adjustable rate mortgage follows to determine exactly how much their payment will possibly increase. From there a standard prequal to see what rates are available to them and how that translates into a monthly payment is easy. Weigh the existing payment with adjustment against the new prospective loan scenario and you will quickly determine whats best for the client. The most important factor is how long do they plan to hold onto that real estate assett and what condition is there credit in. If they plan to stay in the house for a short period of time - an adjustable rate mortgage may be their best option.

You're never catapulted into foreclosure overnight.

Adjustable vs. fixed

Many times getting into a fixed rate means higher rate and payment as opposed to the ARM. It's only been of recent that we've seen mortgage products so tightly grouped together and talks of inverted yield curves where the degree of separation is a tough call between the two. Many times if the borrower can't afford the ARM payment - it's likely that they won't be able to afford the fixed payment either.

So what are you selling?

Today, people have debt, kids going to college, you name it, etc.....making the average loan carried for about 5 years. This translates into a lot of people out there in fixed rate mortgages who are paying higher payments for a loan that is unlikely going to be carried the full 30 years. Never say never!!!

I agree, people do owe it to themselves to review their current loan scenarios to see if they can save money and position themselves in more stable loan products like the 30 year fix. There's a price for everything and refinancing is not free. Theres always a balance between Risk vs. reward. How much will it cost and what are the net benefits?

Educate your borrowers and put them in the drivers seat of their own finances. If you do your job correctly - they'll be able to determine whether they truthfully are risking everything and if you're the loan officer they should be doing business with.

Bruce - you have some good points and I hope to hear more from you. I love these chats and hope you take no offense to my comments. No ill intentions here. Cheers!!!

If anyone would like an honest mortgage consultation without a sales pitch - let me know. My advise is always free.

[OregonLO]

I couldn't have said it any better than that Promortplanner. Sorry Bruce but it seems to be more of a scare tactic than actual advice.

[help4u]

I understand what your saying about the ARMs. Sometimes it's hard to take the copywriter out of me when I need to as a LO.

Thanks for the criticism.

Good day.

[Lenderles]

Great point promortplanner, I'm an arm's dealer because after 3-5 years most of our customers are moving up or down in price. I dont get into the
explaining as extensive as you do. I could'nt bare to wake up the next
mornning and my customer is now my competition. There's no licensing Law
in my state, soon though. the customers like the low payments and I like the repeat business.

you guys are great!