Tuesday, December 4, 2007

It's Over, Folks

I'll cut to the chase first, so you can skip the details, if you wish. My experiment involving the request for a freeze on my 5-year ARM is officially over. I'm not getting it.

I have to say that I am not supportive of people doing this. I also think that a government bail out for borrowers is one of the worst ideas in the world. Many loans (not mine) have been broken apart and sold to investors as securities, who have projected high returns on their investments. If you mess around with one sector to try to "save" it, then you can pull the rug out from under another. Losing both may send us head long into a recession for sure. Also, delaying the inevitable for homeowners doesn't help a whole lot. Most of the borrowers who are behind owe thousands and will never be able to repay it. I say let the cards fall where they may. You don't clean up damage from an earthquake in the middle of the shaking. You wait until it's over and then start to rebuild (with little aftershocks in between).

With my lecture officially over, let me give you the few details of my short-lived adventure. I called the extension that I was given yesterday at 7:30 in the morning and had to leave a message on the voicemail of the Adjustable ARM Department. At 10:15, a very nice man named Brian called me back. I told him that my husband and I lost several hundred thousands of dollars this year and I wanted to start the process to request a freeze on my interest rate. He said that many people are in the same boat and there is nothing he could do. I pressed. He was super nice, but didn't budge.

He said that changing terms on a note was not an option at PHH, but, if things changed, they definitely would notify us, the borrower. I had to laugh, but OK. He said that, although they do not want any foreclosures on their books, at this time, they are not working with any homeowners to freeze any rates--not even if they are behind on their payments (which you all know that I'm not, never have been, and don't intend to be in the future).

Then I reviewed the terms on my note with him. It may work out better than I thought, if the one year T-bill weekly average doesn't do loops. My rate will adjust annually and there is a cap of 5% over my current rate, which is 4.75%. When it adjusts, it climbs by 2.75%. As of today's rate, my first adjustment would be to 6%. This interest rate is applied to my current principal amount at the time and will be amortized by the number of months left on the loan, which will be 300 months. So, by today's numbers, my PI will rise by $278, not the $580 that I had predicted. Not bad for all the benefits that we received by opting for a 5-year ARM.

Other than what I've just recited, I really don't know what the interest rate and payment will be this coming summer. But I do know one thing--calling your lender to ask for a break will not be as easy as the media portrays.