Mortgage Mess! How I Fixed My "broken" ARM

Warning!! Adjustable Rate Mortgage Mess Ahead!

Read on if your dare:

"SAN FRANCISCO, California (AP) -- Here's a safe bet for uncertain times: A lot of banks won't survive the next year of upheaval despite the U.S. government's $700 billion rescue plan to restore order to the financial industry." CNN 10/05/08 or

(Cringing about your adjustable rate yet?)

"AIG hits up Fed for more money

Three weeks after an $85 billion bailout, AIG is turning to the New York Fed for additional funding." CNN 10/08/2008

Oh, oh, and don't forget these great links:

MORE NEWS

• Investors pull $43B out of stock funds
• GM plunges 31% as outlook dims
• National City mum on sale talk
• Answers voters deserve
• Jobless claims fall from 7-year high
• For states, it's a 'worst-case scenario'
• Lenders still on edge
• Dow tumbles 7%
• Iceland suspends trading for 2 days
• OPEC to hold emergency meeting
• U.S. mulls buying bank shares
• Gas drops 4 cents a gallon
• Oil hovers around $89 on recession fears
• Euro banks add more liquidity

Makes anyone with an adjustable rate mortgage sleep much better doesn't?

You just have to love the boys in 'ol DC. They sure know how to fix a financial mess. Inspiring I know.

Our "Calculated" Rate Search

So, about two and a half years ago we here at the house on the lake thought we'd like to buy a house since for the past 20+ years we'd been walking into the bathroom once a month to flush several hundred dollars down the commode in rent. We start looking around and doing the "couples" thing by getting going online to a mortgage site. We used a mortgage calculator to see what we could be pre-approved for and then submitted ourselves to the task of house hunting.

I'll write later about the whole "roaming the countryside for eternity looking at properties" story for another day since I hate to see anyone cry.

Since we had gotten pre-approved we suddenly became the proud receivers of offers from all types of financial institutions that wanted to help us finance our mortgage. Washington Mutual eventually won our hearts and ultimately our ARM. We didn't know a whole lot about ARM's except that they could "potentially" cause problems. They handled everything for us so that all we had to do was show up at the closing, sign a few papers, eat Godiva chocolates and dream dreams.

The signing process went smoothly. Unfortunately, being the typical naive and ignorant consumers we were, we didn't pay too much attention during the signing. Maybe it was the fatigue from the hours of all the signatures we had to sign, but, all we came away from it was that we were in an ARM that would adjust in two years at which time, we were assured, everything would be re-visited and then changes could be made.

Rate Reality Ravages

Well, after about a year we figured we'd re-read the paperwork and use a mortgage calculator to get ready for the upcoming meeting and that's when realized we had a 40 yr. (yup, it says 40), (8.5% first and 10.5 second) adjustable rate mortgage that would balloon up in 12 more months to an amount close to what the Congress is debating for the AIG bailout right now and an interest rate only given by guys specializing in broken legs with a penalty if we tried to dislodge ourselves from it "prematurely". Yipes!

After the panic and vomiting blood stopped, we thought "Maybe we should do a little MORE research and see if there's anything we can do about this?" To my wifes credit, she found a company called TopDot Mortgages which deals with scenarios such as ours and she began a relationship with them that eventually ended up with us landing a real live fixed mortgage.

TopDots customer service was exemplary. Constantly checking in with us, they hand held us all the way. They phoned us often for updates and to see where we were in our part of the process. They even went so far as to have a copy of our paperwork sent by FedEx to Florida where I had gone on some business so that I could sign it after my wife had done so in New Hampshire. Top rate!

Our treatment from them was unexpected. The payment (which is the same as we had with the ARM) now includes the principal, interest AND taxes. And, is shorter in time. Now, they're working with us on an accelerated payment schedule so we can retire the mortgage in about 17yrs. Sure, there were some more costs involved. And a few headaches since we had to gather MORE paperwork. But, we didn't lose the house, get stuck with outrageous payments and we sleep better.

How's Your ARM?

Soooo, just how comfortable do you feel about YOUR mortgage? Take a look at some recent headlines and links I've provided and then try to sleep good tonight:

U.S. bank failures almost certain to increase in next year (http://www.cnn.com/2008/US/10/05/shaky.banks.ap/index.html)
Wondering Which Bank is Next (http://money.cnn.com/2008/09/29/news/companies/bank_failures/index.htm)
http://www.fdic.gov/bank/individual/failed/banklist.html
Wells Fargo to acquire Wachovia for $15.1B Government Seizes WaMu and Sells Some Assets
Bank of America Buys Merrill
U.S.News & World Report%u2028What the Bailout Means for Mortgage Rates
As Big Banks Converge, Depositors Find Deals at Smaller Institutions
How Lehman Brothers Took Out Washington Mutual
The downfall of the $307 billion-asset WaMu represents the largest banking failure in U.S. history, dwarfing the 1984 failure of the $40 billion-asset Continental Illinois, which had previously held the distinction.

Disclaimer: I am NOT a financial advisor and none of the information contained in this article is to be viewed as advise. Also, we don't work for TopDot and have no relationship with them except that they hold our mortgage and we just happen to like them.

Next time, I'll write about our experience working to reduce the payment time , interest saved and the parties involved.