how do I get out of a negative amortization loan ?

mtntrvlr108 · Joined: 18 Dec 2007 Posts: 1 1.61 Dollars($)

I was decieved by an unscrupulous broker and talked into a negative amortization loan, a year and a half into this I need to get out , can I re structure the loan or should I do a deed in leui of foreclosure. word of warning NEVER get into this type of loan it will be the death of your mortgage, REGRETFULL and angry. Thanks for any advice

jenkin7 · Posted: Tue Dec 18, 2007 10:30 pm Post subject:

Hello Mtntrvlr,

Do you have an option ARM? When is your loan settled for a reset?

You may do a refinance but did you talk to your lender about that? I think you should first consult with your lender and see if he is willing to do a refinance.

You may do a deed in lieu of foreclosure any time if your lender is willing to accept that but you will lose your house in that. I think it will be better if you first try out the other options to keep the house and only then think of doing a deed in lieu.

brad · Posted: Wed Dec 19, 2007 6:54 am Post subject:

Good Morning. Before going the route of a deed in lieu just try to work out a deal with your lender trust me a lot of them are working out deals right now because they are taking huge losses from foreclosures.

Also you could refinance into a traditional mortgage if you have the equity! Give it a try let me know if you have any questions

Posted: Wed Dec 19, 2007 10:05 am Post subject:

i would think that your current lender (if it still exists) is an unlikely source for relief. have you contacted any other lenders? that would be a more reasonable solution, it seems to me. by all means, be sure that you are working with a reputable company and that any refinance transaction will be in a fixed rate loan. right now, fha loans are a wonderful bargain; so if you can locate a lender who can put you into an fha refinance, that is likely your best bet. beware of the bait-and-switch tactics, as they still exist.

fha rates should be in a range from below 6% (with points) to 7% or so (possibly without points).

also, since you are in what appears to be a sub-prime situation, you may be one of those who qualifies for the new deals that have come out to help folk in your sort of situation. check into that as well.

rick · Posted: Wed Dec 19, 2007 10:59 am Post subject:

That's really unfortunate that your mortgage broker acted in that manner. Mortgage brokers, at least in my state, are licensed by the department of real estate and there is a number you can call to report them - and the Commissioner is bound to launch an investigation. I'm sure you can make life miserable for that broker.

However, before you go that route, if it were me, I'd call up that broker and tell them that you felt deceived, and if they don't fix the problem (and by that I mean refinance for you and cover all costs), then you have no choice but to report them.

This strategy assumes you are able to refinance into a better loan, of course. If that doesn't appeal to you for whatever reason, find another "ethical" mortgage broker.

Neg Am loans serve a purpose for some people, i.e., those desiring increased cash flow, but the huge risk which isn't often mentioned is that the "pain" is deferred. You are borrowing your equity at a high rate. These loans aren't meant to be long term loans.

The key for you is to make sure you can refinance at a lower rate than the "index + margin" rate (Your neg am rate - not the payment rate of 1% or whatever).

Good luck.

Rick

shane · Posted: Wed Dec 19, 2007 5:11 pm Post subject:

Did you receive proper disclosures on the negative amortization mortgage? Was the APR on the truth-in-lending the actual APR? If the questions to either of those are "No", you might be able to sue the originator and get their company to buy back the loan, which you would then own your home free & clear. I'd speak to a competant RESPA attorney.

Guest

First I would like to thank everyone for the quick replies, I should have stated in my post that I'm in located in California and the housing market is not so great right now to say the least, so the problem with trying to refi my loan is trying to get the house to appraise to do a new loan and I'm upside down right now because of the neg-am loan. I should also say I was contacted through the mail by this broker, when he explained this loan to me he said the loan would go up a "little " and that if I made an extra $500.00 to the payment it should off set neg-am ( HUGE lie ) it wouldn't make much difference at all. Also the Loan servicing comany is in chapter 11 bankrupcy and not much help. I did talk to another broker who wrote an article on line about avoiding this type of loan and he said to see if there are any class action law suites against the company these brokers work for ( I know there are some very good brokers out there I want to make that clear, Ive talked to a few since this happened; not brokers are rip -offs ) Rick thanks for the reply and I will report him to the California realestate board. Shane, no the brokers didn't explain the loan, if they had I wouldn't have gotten in to it, what does RESPA stand for ? thank you for your reply.

mtntrvlr

uptightmortgageguy · Joined: 25 Nov 2007 Posts: 21 Location: WV 8.00 Dollars($)

The FHA refi option is a good product but will require a 95% loan to value ratio on your new loan. With your current neg am, you will not likely be in that position unless you put a considerable amount down on your purchase.

If you are in a deteriorating home market, that will work against you as well. If your current lender will not work anything out, you will likely have to bring cash to the table to pay down the principle balance on your note in order to qualify for FHA.

It might be a good option to come up with some cash instead of losing the home you worked hard for if need be.

shane · Posted: Thu Dec 20, 2007 10:07 am Post subject:

RESPA stands for the Real Estate Settlement Procedures Act, it has to be strictly adhere to during the origination process or the originator can face violations/fines/buy backs of whole loans it originated.

Posted: Wed Dec 26, 2007 4:39 pm Post subject:

mtntrvlr,

I'm sorry if I sound negative but the real deal here is that you have signed all the papers whilst getting this loan. Hence, I really doubt if there's much that could be done to sue the broker.

I completely agree to what Shane has suggested you, if you find a single discrepancy in the loan term, you would be able to go ahead and report the broker

If there's equity on the property, you can go for a traditional mortgage and get things back on track. It's imperative that you get rid of the Neg-Am at the earliest because it will only burn off the equity of your property.

Please let me know if you have any questions.

shayneroy · Joined: 12 Nov 2007 Posts: 51 21.08 Dollars($)

Sorry, the earlier post was by me.

Jessica · Last edited by Jessica on Wed Jan 02, 2008 12:09 am

Hi mtntrvlr,

I think it's a big lie indeed from the broker because he didn't explain the program clearly to you. After all, you received the offer through mail and didn't even get the details properly. I'm not discouraging you but you should have been a bit more careful regarding accepting the offer. Well, now that it's already done, just try to get rid off the loan asap.

I agree with Shayne Roy in this regard. Look for any discrepancy in the loan agreement so that you can sue the broker, but you will need an attorney's help for that and check beforehand if you can afford the fees.

At the same time, try to look out for a lender with whom you can refinance the negative amortization loan. And, this time, do meet him personally and request him to explain the loan program in details. Try to get pre-qualified with 5-6 lenders – I mean get a verbal agreement that you can qualify for the loan, and then compare the rates, fees and monthly payments that you need to pay with different lenders. This will help you to choose the right lender and then apply for the loan.

Please don't worry; we often fall into such situations, but there are solutions too and for you right now, the best solution is to get yourself out of this loan asap. But at the same time, don't take a hasty decision also. Think and decide and if you need any suggestions on any loan offers that you come across, feel free to consult our community lenders and members. And, if you feel like, you can even talk to our community lenders as to what they can offer you.

How things will be fine for you soon.

Good luck and cheer up Smile

gmakerley · Posted: Thu Dec 27, 2007 12:39 pm Post subject:

suing your broker seems like a lost cause to me. you have already stated they are in bankruptcy; go ahead and make the effort, but i would suggest you not spend a lot of your cash in pursuing that. you may (??) be able to file for some sort of relief in the bankruptcy court, but that's a whole other thought.

your situation is not improved, obviously, by the current real estate market. if you have any equity in the home at all, then you will have the opportunity to do a refinance - especially fha - that will eliminate this situation.

i think the bottom line is that your home's value relative to the total debt is critical.

Guest

Jessica Thank you for your post, I know I'll get through this and into a better financial situation soon and will certianly be more cautious with my next home loan and lender.

adonis · Posted: Wed Jan 02, 2008 12:15 am Post subject:

Yeah negative amortization loans are horrible; my friend got into one such loan and he still regrets for having taken it. Luckily he could pay it off as he had assets worth large sum of money.

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