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Like many homeowners, I got my escrow analysis recently on one of my investment properties (and it wasn’t one that I was doing especially well with in the first place). I’ll tell you right off the bat that it’s got a negative cashflow to begin with. Perhaps one of these days I’ll go into the whole story on why and what the long term exit strategy is.

Long story short, the payments went from $2285.84 to $2811.67.

Oh yeah… and the HOA went from $500/quarter to $533/quarter. I know this doesn’t sound like a lot, but every dollar starts to add up.
So, as of January 1, 2008, the payments have increased from $2452.61 to $2989.34. This means that my payment went up $536.73 every month. And keep in mind, I was upside down every month before. THIS HAD NOTHING TO DO WITH THE MORTGAGE ADJUSTING and I have owned this property for 19 months so there’s no first year adjustment for taxes to take into account.

My first reaction was to get angry – I mean really angry. Are you kidding me? How did this happen? So I quickly called the bank to try and figure out what was going on. They were collecting around $714 per month for taxes and insurance. This is DOUBLE what my taxes and insurance should be. Read the full story

Here’s an interesting story. I called Indymac, the lender for my home loan. I chose a pay option arm for a few reasons. I understand the loan and use it from an investment perspective under the advise of my CPA and two. But… at any rate, I called to ask what my options were at this point with a about 18 months left on the prepay. I told them I’d like to consider refinancing the loan with them and asked if they would they be willing to work with me on the prepayment penalty. As I suspected, their answer was an emphatic, “No”.

I did the numbers and it simply doesn’t make sense. BUT… what about homeowners that can’t afford the payments when they adjust? They have two choices: 1 – pay 3 or 4 times what they’ve been paying for the last few years; 2. Default on their mortgage and go into foreclosure. Sometimes the loans adjust in the middle of a prepayment penalty. So, what options does a homeowner have when faced with this situation?

This is the most frustrating thing, in my opinion. You’ve got homeowners that listened to their mortgage broker or loan officer, have paid faithfully by the terms they understood (there was a lot of misinformation about these neg-am loans), and then lose their homes because the lenders won’t budge. I realize the banks are in it to make money – and prepayment penalties help that – but don’t you think they’re going to lose a whole lot more when all these loans default? Read the full story