Asian Journal- The Filipino-American Community Newspaper

QUESTION: My real estate agent recommended this house that is within our budget. Initially, he explained that we will be paying about $2,500 on my house worth $300,000. Hence, we bought the house last December, 2004. They asked us to sign voluminous documents. I did not read them because I trusted the real estate agent who explained the loan to us in Tagalog. I am sixty-three year old and I could not understand all the documents.

My principal loan balance kept on increasing, even though we were never late or missed a payment. I only realized that my payment plan was Negative ARM (Adjustable Rate Mortgage) and all the interest I was not paying was being included in my principal. Our mortgage payment is due to increase soon. My husband and I just depend on social security payments. I ‘m afraid we cannot afford to make the new payments.

We do not want to lose our house but we cannot afford to make monthly payments. A friend suggested that we file for bankruptcy or have our loans modified. However, we really do not have credit card debts and our car is fully paid. What are our options? Can we really save our house? This is the only property we have.

Answer: Bankruptcy will not really help you because you have no unsecured debts. In bankruptcy Chapter 7, you do not have to pay for your unsecured debts. However, if you can modify your loan, you just may be able to afford your house. The rates of interest banks are willing to offer now for hardship-based borrower are extremely lower than loan agreements in previous years. For instance, some banks are even offering 2% interest for five years.

Option ARM or Negative ARM payment scheme was devised by lenders to afford payment flexibility but it does not in effect increase overall affordability. In this payment scheme the interest that you are not paying for the first years (usually five years) are simply deferred and added up to the principal loan. Borrowers ended up paying more in interest in the long run. Your deferred interest payments are added up to the principal and they charge interest on the compounded principal.

Based on hardship, you can apply for loan modification with the bank. Negotiate with the bank to lower your interest rate, extend the term of the loan, or even lower your principal.

You can also ask a lawyer to review your loan documents if there are other federal or state law violations. For example, Truth in Lending Act (TILA) mandates that each borrower was given a "Notice of Right to Rescind/Cancel" and it must state the date the rescission period expires. Other lender violations may include billing and servicing problems, unconscionable interest rates, improper calculation of interest rates, attaching unconscionable insurance charges. Your lawyer can do a forensic audit on your loan documents to find out lender violations. These violations are grounds for filing a case against the bank. These violations can also be used to negotiate with the bank for a loan modification and get them to agree to the plan.

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If you have any loan from countrywide or any of its affiliates, please call our office at 213-639-3888 or e-mail us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . Our office is located at 3699 Wilshire Boulevard, Suite 720, Los Angeles, California 90010.

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This article does not constitute any legal guarantee or advice for any individual matters and does not create attorney client relationship with the readership.

( www.asianjournal.com )

( Published on September 12, 2009 in Asian Journal Los Angeles p. C5 )