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Mortgage crisis prompts AFL-CIO to host "Save My Home" HotlineFree Service at 1-866-490-5361
Many homeowners have adjustable rate mortgages (ARMs)—but nearly half who have them admit they do not know how their ARMs adjust or reset, and nearly three-quarters do not know how much their monthly mortgage payments will increase when they do reset, a new national survey has revealed.
The survey by Peter D. Hart Research Associates for the AFL-CIO found last September that ARM holders are generally not concerned about mortgage payments -- until their rates reset.
Then anxiety sets in as they realize their payments have risen substantially.
The use of ARMs for home financing has grown dramatically over the past few years and particularly among higher-risk subprime borrowers. Now the entire country is aware of the danger.
AFL-CIO President John Sweeney and Union Privilege President Leslie Tolf have announced the launch of the Save My Home Hotline.
As part of a model homeowner education program, the hotline will provide information and advice to help union members and their families avoid foreclosure. (The AFL-CIO also sponsors a trust to assist union members with financial hardship due to disability or unemployment.)
The Save My Home Hotline will provide free, confidential advice 24 hours a day, seven days a week from the counselors at Money Management International, a nonprofit, HUD-certified housing counseling agency. Face-to-face counseling is available at more than 100 local offices in 22 states and the District of Columbia.
Union members and their parents and children can call the hotline for advice at 1-866-490-5361.
While many homeowners with ARMs remain personally optimistic, according to the Hart survey, 62% said they believe escalating mortgage rates are hurting their communities, and 48% expect they’ll have to cut back on everyday expenses like groceries, clothing and gasoline when their payments increase. For families earning $50,000 or less, that number is 8%.
Asked if they feel confident or worried about making their monthly mortgage payments over the next few years, 41% of homeowners whose ARMs had reset say they are worried, compared with 18% of those whose ARMs had not reset.
Says AFL-CIO President John J. Sweeney: “What we have here is a tale of two communities. The trapdoor between the American Dream and the American Nightmare for these homeowners is the ARM adjustment. This survey shows that many homeowners simply are not prepared for the steep rise in mortgage payments that this market inflicts on ARM holders."
Despite a general lack of understanding about their adjustable rate mortgages, 79% say they believe the information they received from their lenders was mainly accurate and truthful. Sixty percent say they got their ARMs from mortgage brokers, and 39 percent directly from banks.
Says Tolf: “There is a big disconnect between what people know and what they think they know. That’s why we believe homeowner education is so essential. Sixty-one percent of those who have been late paying their mortgage in the past year don’t know where to turn for help. These are people who need help the most.”
The Save My Home Hotline will provide needed advice to homeowners who are behind in their payments, already in foreclosure or looking for advice in how to budget and restructure their debt. Notes Tolf: “Ideally, we can reach homeowners before they get in trouble.“