OLYMPIA, WA - The Department of Financial Institutions (DFI) is urging homeowners with adjustable rate mortgages to plan now for potential interest rate increases. Nontraditional mortgage loans, including many adjustable rate and subprime loans, frequently feature a periodic adjustment resulting in significant payment increases. Earlier this month, DFI sent a letter to consumer loan companies asking them to work with consumers who are experiencing difficulties making payments.
As interest rates reset, consumer loan companies are reminded that alternatives to immediately foreclosing - such as making modifications to the loan's terms and converting variable interest rate products into fixed - are available. Creditors should inform borrowers who are delinquent about opportunities for homeownership and debt counseling. In addition, the Servicemembers Civil Relief Act prohibits the sale or foreclosure of an enlistee's property during the military service period.
"We encourage our licensees to provide consumers with information before interest rate changes occur," said Scott Jarvis, Director of DFI. "It is important for borrowers to know how their monthly payments will be impacted. If the loan goes into default," he added, "companies should help borrowers avoid making rash decisions to lower their exposure to predatory foreclosure rescue scams."
DFI regulates approximately 2,000 mortgage broker companies and 350 consumer loan companies.
Washington State has fewer subprime mortgages than most states and one of the lowest foreclosure rates in the nation. However, many borrowers may see rate increases in the months to come.
Borrowers who are facing payment increases are urged to be proactive by:
- Seeking information to understand mortgage details and prepayment penalty terms
- Budgeting accordingly for future increases
- Asking about alternative repayment solutions if loans are past due