Adjustable Mortgage Tricks-How Borrowers Got Taken With The ARM Loan by Corey Williams

If you had bad credit or no money down you could still buy a home or refinance your mortgage up until just a few years ago. A popular loan that many companies gave to borrowers during this boom in real estate was the ARM mortgage, most were secured through the use of a sub prime lender. While it is a fact that ARM loans did help consumers buy and refinance homes they were also a tool used by dishonest lender to make maximum profit. The adjustable rate mortgage was used when some one with less then desirable credit called or stopped in to apply for a mortgage. These borrowers were almost always steered into a sub prime ARM home loan even if they could have qualified for an FHA loan. Why Were Mortgage Brokers Doing This? The major reason is for repeat business, the adjustable home loan only has a fixed rate for 2-3 years and most k lenders knew that they could talk the borrowers into refinancing much sooner then that. Many times they were refinanced back into an ARM loan once again!! It was really a simple way for dishonest lenders to maximize commissions from unsuspecting borrowers who thought they were being helped. Then It All Went Bad? A vast majority of the home owners that were being taken advantage of had poor credit scores and were required to use a sub prime lender or face a rising interest rate and bigger payment. This was working just fine for all partied involved until the housing market and real estate boom crashed and all the bad credit mortgage lenders went out of business! With no equity left in many of their homes and traditional banks not wanting to loan to them these people had nobody to help them. This is when the record number of foreclosures started to happen! What Can I Do If I Cannot Refinance? About the only option you have left at this point is to ask the company currently holding your loan to help you out. The help will normally come in one of two forms and is normally called a loan modification.A loan modification is where your loan holder changes the terms of your existing ARM mortgage and either switches it over to a fixed rate or gives you an extension on your fixed rate period.