by Osman Parvez
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I happened to check the Searchlight Crusade mortgage blog last night and found an article that relates to my post on option or “pick a pay” loans. It’s about a borrower who refinanced his mortgage and was seemingly tricked into a toxic loan by his dodgy lender.

The borrower writes,

“I recently refinanced and the mortgage broker lied to me about many, many things. I was sold a negative amortization mortgage. The broker provided me a chart showing my payment schedule for 30 yrs; it showed my payment split between interest & principal. I was told that my rate was fixed for 5 yrs and that it would go up to as high as 9% after the 5 yr period. When the closing came and I inquired about the 9% highlights in the docs and the negative amortization disclosures he stated that they didn’t apply to me or this loan. He pointed to the section of the doc that stated that my payments would be fixed for 5 years and that my interest rate would also be fixed for that 5 year period. After closing I received the docs from the lender which outlined the fact that I had 4 choices for payments and when I called for the explanation I almost died. The broker apparently didn’t really understand the loan at all; he has now offered to refinance me without any fees…but I am supposedly stuck with the prepayment penalty.“

Ouch.

Once again, be sure to use only a reputable lender, people. This borrower’s experience is why I recommend you get referrals and ask mortgage brokers to compete for your business. You will get a low rate without unnecessary fees. At the closing table, double check the figures before you sign anything and make sure it matches your expectations.

As the author of Searchlight Crusade points out, you only need negative amortization disclosures on negative amortization loans. You can read the rest of the article HERE.

p.s. Should the borrower have known better? Maybe. PT Barnum said, “there’s a sucker born every minute.” Our goal is help you avoid being one.

Image: numberstumper

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