OK, need to ask this: ARM mortgage set to increase...

[TiredandWeary]

OK, as much as I hate to ask this question, I do need to know...since our ARM mortgage is scheduled to increase our monthly payments by more than $600 beginning next month, when exactly will the trustee be notifying us that our trustee payments must also increase accordingly? Our payments are normally due on the 14th of every month. October 14th is around the corner and the only thing we've received thus far was the official notification from the mortgage lender about a month ago stating the increase in our interest rate and mortgage payment set to increase with the Oct. payment. Doesn't the trustee need to get involved at this point and officially file some kind of amended plan to show that our trustee payments must also increase as a result of this? At this time, my husband and I are not planning on changing how much we mail to the trustee in October if the trustee never sends us any kind of letter stating this change. Of course, we do realize that at some point they will surely catch up with this ARM mortgage payment increase and we fully anticipate that we will be expected to pay back any months where our mortgage payments should have been higher beginning with October.

Does anyone have any experience with this? Has anyone been in the predicament where the trustee did not send notice on time to increase the payments in order to accommodate the increased mortgage payments?

[lrprn]

...since our ARM mortgage is scheduled to increase our monthly payments by more than $600 beginning next month, when exactly will the trustee be notifying us that our trustee payments must also increase accordingly?

Yikes!! You've misunderstood how this works, T&W. The trustee isn't ever going to notify you about this.

Your lawyer has to file an amended Ch 13 plan that includes the increased mortgage payment with the court. Call your lawyer IMMEDIATELY and tell him/her about your ARM balloon coming due in two weeks!!

Start making plans RIGHT NOW for how you are going to cover the increased mortgage payment in October if your plan isn't amended and approved by your trustee in time.

[MajorMike]

Can I ask a dumb question. Why do people get these types of mortgages? I've seen it on the boards a lot and I'm just wondering why. Why wouldn't you get a fixed rate in the beginning and never worry about this??

[BKOnce]

Can I ask a dumb question. Why do people get these types of mortgages? I've seen it on the boards a lot and I'm just wondering why. Why wouldn't you get a fixed rate in the beginning and never worry about this??

Simple, because people could not afford big house, big mortgage payment, or insufficient income level, etc.. howver, they still want to buy, still want involve, still want to stay in house, still hope things get better/refinanced, etc... until... equity/price depreciates ... could not refinance and/or approved... and then it will knocks out them ... an ARM & a leg...

[cubfan300]

In my instance, we refi'ed in an attempt to pay off credit cards......living beyond our means. In some perverse way, Chapter 13 was the BEST thing ever to happen to my wife and I as we were finally forced to budget our money and live in a way more appropriate with our income. Mind you, before the bashing begins, we are both college educated, well paid professionals that never gave a thought to how much went out the door, until I went on short term disability for back surgery and then lost my job.

[MOMof3]

It's not true that you HAVE to file an amended plan. Our trustee sent us a letter stating the increase and that we had 10 days or so to contest it. Then after that time period we got our copy of the notice of increasing my wage garnishment from work. In our original paperwork it stated that WE were responsible for notifying the trustee of changes in our mortgage payment. In our case, Chase was MORE than happy to notify the trustee for us Since we are 0% to unsecureds, there was no room for us to file an amended plan.

[BlessedOne]

Can I ask a dumb question. Why do people get these types of mortgages? I've seen it on the boards a lot and I'm just wondering why. Why wouldn't you get a fixed rate in the beginning and never worry about this??

Your question is dumb. Why not ask the mortgage companies why they didn't offer fixed rate mortgages to their customers. Do you think the millions of Americans in this mess wanted their rates and payments to increase to the point where they can't afford to make their payments?

[JollyGG]

Can I ask a dumb question. Why do people get these types of mortgages? I've seen it on the boards a lot and I'm just wondering why. Why wouldn't you get a fixed rate in the beginning and never worry about this??

Your question is dumb. Why not ask the mortgage companies why they didn't offer fixed rate mortgages to their customers. Do you think the millions of Americans in this mess wanted their rates and payments to increase to the point where they can't afford to make their payments?

I actually don't think this is a dumb question.

Some people buy a house only expecting to stay a couple of years. These types of loans work well for them because they pay a low interest rate the years they are there and then they move on before the interest rate increases. For example I have a couple of friend who are in medical school. After their four years of medical school they will sell the house and move on. An ARM works for them.

Up until recently homes were going up up up in value. So people anticipated that they would get the loan with the ARM. In a couple of years when their homes had appreciated they would have equity and could get into a nice fixed rate mortgage. Unfortunatelly, for many of them the housing bubble burst.

The ARM is also used by people who are buying a fixer upper. Either they anticipate refinancing after they have made improvements once again having the equity to get a good fixed rate. Or they thought that they would sell the house for a profit after fixing it up long before their ARM adjusted up.

Other people just got them out of optimism. The kids will be out of daycare, or out of the house, the car will be paid off, I'll get a better job, I'll get that promotion, I'll pay off my other bills while the mortage is low, ect. before the ARM adjusts and at that time in the future we will be able to afford the higher interest rates.

[TiredandWeary]

Can I ask a dumb question. Why do people get these types of mortgages? I've seen it on the boards a lot and I'm just wondering why. Why wouldn't you get a fixed rate in the beginning and never worry about this??

Hi, Major Mike. Well, I'll address your question directly since you asked. At the time two years ago, I honestly did not think we were headed for BK. We were attempting to consolidate our debts in order to keep our monthly payments affordable until such time as our new home was to be built. You see, we were planning on having a new home built and part of the debt we had was a result of putting down a $20,000 down payment on the new home. The payments had become unaffordable for our budget after about 5 months or so. We had intended to make this short term arrangement by refinancing with the intent that we would sell our existing home within about 6 months and then pay everything off before moving into our new home. Needless to say, here we are two years later living a nightmare that we never thought we were headed for, by any means! Our entire plans and dreams were turned upside down and did not go in any way as we had planned. Thus, we are now stuck with this mortgage that was fixed for 2 years and now has the ARM going into effect. Again, I NEVER would have agreed to this had I truly anticipated we'd be staying in our home this long. This was not the plan AT ALL! Chalk it up to a terribly painful financial lesson for us! So, that is how we ended up with this ARM. Prior to this, we had always had fixed rate mortgages.

[B12]

LOL thank you Jolly....I repeat this so much, I turn blue in the face.

The ARM is a very good product if used properly.

And........... companies DO offer fixed rate mortgages, the choice is yours, not the mortgage company.

[Bandit]

Is ARM the same thing as what some call BALLOON?

[JollyGG]

Is ARM the same thing as what some call BALLOON?

No it is not.

An ARM is an adjustable rate mortgage. So you buy your house and in your agreement you have a low fixed interest rate for a set number of years. Then once those years are over your interest rate will increase based on the prime rate.
So what happens is as interest rates increase your payment increases.

In a mortgage with a balloon you owe a large sum at a set point. You have a payment each month and at a set point you will owe one large payment of the rest of the loan. So for example you pay $500 per month for 120 months and then you owe one payment of $20,000 to pay off the loan.

No I am no expert on mortages so If I got anything wrong I hope someone will correct me or mabey come along and explain better.

[MOMof3]

Along these lines, does anyone know if it is possible to do a REFI while in a chapter 13 and get a "decent" fixed rate? Probably not I'm guessing. I think we are stuck w/our huge ARM payment!

[B12]

You are exactly right Jolly.

But, when the "balloon" comes due at the end of the term, you can pay what is left or refinance the balloon into another mortgage.

[lrprn]

Along these lines, does anyone know if it is possible to do a REFI while in a chapter 13 and get a "decent" fixed rate? Probably not I'm guessing. I think we are stuck w/our huge ARM payment!

Sorry, but the chances of getting a decent refi rate from a lender during the first few years of an active Ch 13 is near zero, and it doesn't get much better after that until your Ch 13 is discharged.