Credit Secrets & Tips

Adjustable-rate mortgages has a very low payments in the early years of the loan that will sharply increase when interest rates reset.

Homeowners with ARMs who are not able to make their monthly payment when the interest rate goes up should contact the lenders as soon as possible to discuss their options.

Defaulting on a home loan means you can lose your home. The lender has the right to foreclose – to sell your home to raise money to pay off your debt if you default.

You would also severely damage your credit record, making it more difficult to borrow money or get a job or insurance in the future.

Consider following steps to avoid that result.

While many lenders and loan servicers (companies that accept borrower payments and help administer escrow accounts) are writing or calling customers who face big rate increases about the possibility of refinancing or restructuring their loans.

The borrowers who anticipate having difficulty making payments to take the initiative and
negotiate the lenders by modifying loan terms or changing from variable-rate loans to fixed-rate loans that may be available at a lower monthly cost.

The borrowers who are delinquent on their mortgage loans should consider getting help from a
housing counselor. These are public and private organizations that offer advice and assistance on everything from buying and financing a home to dealing with debt problems, including avoiding
foreclosure if the borrower misses loan payments.

Some counselors assist consumers by working with lenders on their behalf, but it’s always important for the borrower to be actively involved in this process.

I suggest consider these resources for finding a reputable housing counselor:

- The Department of Housing and Urban Development (HUD) maintains a list of approved housing
counselors who give advice free or at low cost.

To locate a HUD-approved counselor in your area, call 1-800-569-4287 or go to http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm.

- NeighborWorks America, a national nonprofit organization created by Congress, and HOPE for Homeowners, a service of the nonprofit Homeownership Preservation Foundation, have established a toll-free hotline at 1-888-995-HOPE (4673).

Callers can receive immediate free advice and support from nonprofit, HUD-certified organizations 24 hours a day, 7 days a week. Callers who need additional assistance will be referred to reputable local counselors. For more information, visit http://www.995hope.org.

Also be aware of credit-repair scams that target homeowners having serious problems making their mortgage payments. The Phony companies claiming to be housing counselors promise to help negotiate a new loan or perform other services for a hefty fee that is collected up-front.

The companies actually do nothing at all or perform services consumers can do for themselves at little or no cost. Turning to a HUD-approved counselor for assistance is one way to avoid these types of fraud.