How to Request a Mortgage Rate Adjustment Fixed

Lenders may be willing to convert your adjustable mortgage to a fixed rate in order to avoid a foreclosure.

Many homeowners got in mortgage trouble when the price of homes dropped in 2008 and 2009. They may have bought a home using an adjustable rate mortgage, intending to refinance later to a more affordable loan. When housing prices dropped, it made this option practically impossible because it left many people owing more on their house than what they can sell it for. Plus, the adjustable interest rate may be adjusting higher, sometimes doubling or tripling the monthly payment. If this is the case with you, your lender may be willing to change your adjustable rate mortgage to a fixed rate that will be more affordable.

Instructions

1. Send your lender a letter explaining why you cannot make your mortgage payments. Also describe a plan for how you can make it work.

2. Give your lender a list of your income and expenses. To change your rate, you must prove to your lender that you do have more expenses than income. You may need to cut down on nonessentials or maybe take on another part-time job to show that you are taking steps to solve the problem that got you into trouble.

3. Ask the bank for a fixed rate mortgage (a rate that remains constant over time) and possibly an extension on the length of the loan. Banks would rather not foreclose, so they may be willing to work with you.

4. Offer a lump sum to pay off a second mortgage. You may try offering a lump-sum payment that is less than what you owe. If the lender accepts it, you will have gotten rid of your second mortgage.

Tips & Warnings

• Find out to whom you need to submit your loan modification request. If you contact the wrong department, especially the collections department, you could worsen your situation.

• If you do not think that you can do this on your own, you can hire a lawyer to help you.

• Talk to a financial adviser or housing counselor at the U.S. Department of Housing and Urban Development at 1-800-569-4287.

References

• The Federal Reserve Board: Consumer Handbook on Adjustable Rate Mortgages
• McFarlinLaw & Geurts LLP: Information About The Loan Modification Process