Exact Steps to Take to Renegotiate Your ARM Mortgage

How to Keep Your Adjustable Rate Mortgage (ARM) from Going Up (Part II of II)

I spoke with a bank representative on the condition of anonymity, who said to take the following steps when attempting to renegotiate an ARM mortgage:

1. Call the Note Holder: In other words, call the company you pay your mortgage to ever month. Their contact information can be found on your monthly mortgage statement. 

Ask to speak to the Loss Mitigation Department. This is the department that handles collections basically.

A Banking Irony: You should call before you get behind on your payments. However, know going in that many are not going to want to renegotiate with you unless and/or until you are behind on your mortgage payments.

You may have to keep calling to get someone to work with you, but at least they will have a record of your call long before you run into trouble. The point is to stay persistent if you know that you are not going to be able to afford your mortgage once the rate goes up.

2. What to Expect: Once you speak with the loss mitigation department, explain why you're not going to be able to afford the new payment once the rate adjusts on your mortgage. And, be ready to prove it. How?

They're not going to just take your word that you're not going to be able to pay. They're going to ask you for proof. Eg, pay stubs, monthly obligations, household income, etc.

Once they get all of this information, they will run a DTI (Debt to Income Ratio), much like your loan office did when you first applied for your mortgage. Based on their formula, they will decide if you are a good candidate for renegotiation.

3. Provide Paperwork: If your lender decides to let you renegotiate your ARM, they will ask you to send all paperwork within a certain time frame - usually 7 to 10 calendar (not business) days. Do it! Otherwise, you may blow the deal.

Once they have all of this, they will send you some paperwork to sign with the new loan terms spelled out. Whether it's a refinance, a delayed rate adjustment or a new payment schedule - read over the documentation carefully to ensure it's what was agreed to over the phone.

NOTE: Most times, your deal will be worked out over the phone and the institution will mail you papers with the agreed upon terms spelled out.