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Plan For Mortgage Rate Increases

DFI is urging homeowners with adjustable rate mortgages to plan now for potential interest rate increases by the end of the year. Nontraditional mortgage loans, including many adjustable rate and subprime loans, frequently feature a periodic adjustment resulting in significant payment increases.

How Can I Prepare?

Borrowers who are facing payment increases are urged to be proactive by:

Reviewing all loan documents and prepayment penalty terms carefully. If you are unclear about your loan's terms, contact your lender immediately and ask questions. To learn more about mortgages and prepayment penalties, visit DFI's Free Guide to Home Loans.
Budgeting accordingly for future increases.
Asking about alternative repayment solutions if loans are past due.

If the interest rate rises to the point where your payment is not going to work with your current financial situation, it is time to take action. Doing nothing and hoping for the best is never a good strategy.

Alternative Repayment Solutions

Contact 1-888-995-HOPE for help in determining which, if any, of these options may meet your needs. You should also discuss the situation with your lender.

Special Forbearance
Your lender may be able to arrange a repayment plan that would be based upon your current financial situation and may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you've recently experienced an involuntary reduction in income or an increase in living expenses.
Mortgage Modification
You may be able to refinance the debt and extend the term of your mortgage loan. This will help you catch up by possibly reducing the monthly payments to a more affordable level. You may qualify if you've recovered from a financial problem but your net income is less than it was before the default.
Partial Claim
Your lender may be able to work with you to obtain an interest-free loan from HUD to bring your mortgage current, if you qualify.
Pre-Foreclosure Sale
This will allow you to sell your property and pay off your mortgage loan to avoid foreclosure and damage to your credit rating. If you're unable to afford the house long-term, you may sell the house yourself before the foreclosure sale and save some of your equity.
Deed-in-lieu of foreclosure
As a last resort, you may be able to voluntarily "give back" your property to the lender. This won't save your house, but may help your chances of getting another mortgage loan in the future.

Resources from DFI

Other Resources

1-888-995-HOPE - 24/7 toll free number for individuals who need help and guidance
HUD Approved Counseling Agencies - Housing counseling agencies in Washington who give foreclosure advice for free or at a low cost.
Consumer Handbook On Adjustable Rate Mortgages - Information about adjustable rate mortgages from the Federal Reserve Board.
Federal Reserve Board - Foreclosure Resources - Information and links to agencies that might be able to help you avoid foreclosure.

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