If your loan amount is over 417,000 and you make your payments on time, you will NOT benefit from the interest rate freeze. You will not benefit if you are a good qualified borrower and simply do not like your interest rate. Fair or not, not all loans, actually very few will qualify for the proposed program.This is causing quite a stir in politics, the mortgage industry, Wall Street and the consumer market.Not fair!!Of course, it is [not] fair.

     I have several clients in Option Arm programs, all of which are in loan amounts over 500,000. The Option Arm, is a loan that allows you to pay a very low (phantom) monthly payment even though your actual interest rate is much higher.For example, your real interest rate can be 8.25%, but your minimum payment choice is 2%. These borrowers are self employed or in high salary positions with commission or bonuses. They own high value homes and live well.These are the borrowers that the program was designed for. They are successful, financially responsible individuals that are aware of their monthly overhead, but get paid additional chunks of money through the year. These chunks of additional money are supposed to go to paying down the principle.

     However, how many of them really do that? They make the minimum payment because they choose to- not because they have to. They have decided to not contribute to the principle and spend their money elsewhere.They drive expensive cars, take expensive vacations and shop at Barney’s.Then they call me and cry that the interest rate is too high and it should be lowered.They want to say they did not understand, but they did and made the choice themselves. They scream they are getting screwed by the system and it is unfair!

     What they do not understand is that they are part of the system….and part of the problem.People poo poo things until it hits home. I can only hear the screaming at the Exxon Station when they pay a hundred bucks to fill up the SUV!

Have a great weekend!

– Dale Siegel