Attention Home Owners:

If you’ve got a 7% adjustable mortgage that’s about to skyrocket past 10%, getting a break may get a lot easier. One solution to the foreclosure problem gaining traction would freeze rates at lower levels. Lenders quietly began offering such freezes during the summer. Last week California officials announced a rate-freeze deal with four major lenders.

And now the Hope Now Alliance, coalition of lenders, servicers, investors and community groups, put together by the Treasury Department, is working on its own version of a freeze.

Details of the Hope Now plan have not been finalized, according to Kurt Pfotenhauer, a senior vice president for government affairs with the Mortgage Bankers Association, which is part of the Alliance.

But for a borrower with an adjustable rate mortgage (ARM) at 7 percent on a $200,000 loan, a freeze would mean substantial savings. If the loan were to reset to 10 percent, the monthly payment would jump from $1,331 to $1,755.

Judging from other lenders’ plans, a reset freeze would be available only to those borrowers judged unable to make payments at the reset rates.

That would be determined based on a borrowers’ debt and income, according to Pfotenhauer, who could not specify what standard Hope Now will use. Historically, the lending industry judged affordability in this way: Total debt payments each month should not exceed 36% of total income. But in a bill sponsored by Barney Frank (D- Mass.), that threshold is set much higher, at 50%, according to Pfotenhauer.

Borrowers for whom loans are unaffordable even at the initial rates would likely not qualify, as is the case in current programs offered by Countrywide and other lenders.

And borrowers with enough income to pay the higher reset rates may also not qualify for a freeze. Many of these good payers, however, have the option of refinancing. A huge segment of this group is already refinancing just fine, according to a lending industry spokeswoman, speaking on background.

But not all borrowers in good standing are able to take advantage of refinancing, according to John Taylor, president of the National Community Reinvestment Coalition. Many of these borrowers own homes that were appraised much above actual values when they bought in 2005 and 2006 and market prices have dropped since.

These under-water borrowers might not be able to refinance because lenders are no longer willing to advance more than 100 percent of home equity.

For more infromation and help buying or selling in Maryland contact us at www.PakullaProperties.com

Reprinted with permission by:
Chris Montcalmo - Mortgage Director - Columbia Bank
410.812.6854: Cell
443.874.1339: Fax
cmontcalmo@thecolumbiabank.com