Check These Out

Homeowners Should Beware of Offers from Lenders

Friday, March 7, 2008 posted by Tommi Crow

rat       If you are one of the millions of homeowners who have an Adjustable Rate Mortgage (ARM), be wary of offers of assistance from lenders.  Through a recent experience, I discovered why we should educate ourselves about the terms of our existing loans, before talking with our lenders.


I received a letter this week from Citibank, my lender, entitled “Mortgage Volatility = Mortgage Tranquility”.  The letter, set in threatening bold type, warned that my Adjustable Rate Mortgage was about to RESET.   Triggering fears that my decision to finance with an ARM would come back to haunt me, I interpreted this “call to action” as a sign that my lender was looking out for both of us.  Only after I experienced the “personalized service from the people I know”, did I discover how gullible they still believe we are.


Upon reaching a Citibank agent, I was warned that my mortgage interest rate would jump from 4.375% to 6.75% on June 1st, 2008.  The agent immediately offered to help me avoid the foreboding event with an offer to refinance my loan at only 6.25%.   My first reaction was “whew, am I lucky”, but then I wondered…”How does this young lady know what interest rates will be in June???”   “Haven’t we heard talk of another interest rate cut on the 18th of March, for example???” 


Smelling a rat, I decided to learn the logic behind her advice to get rid of my ARM.  I ask what Index rate and Margin she was referring to, so that we could compare the numbers.  Unbelievably, my agent had no

information about my existing loan at all.   How could that be?  How could she recommend a costly action without the figures to support it? 


I decided to push on, determined to learn if anyone at Citibank could tell me what facts they relied upon, before recommending a new loan.   On my third attempt, I reached a lady who knew a little

information, “little”, being the key word.  She revealed that my “Index was the “

Treasury Security Average” and that my Margin was 2.75%”.  When I ask which US Treasury Security Average she was referring to, she didn’t know.   I tried rephrasing. “Can you tell me then what my Index rate would be if my loan were resetting today?”  She had no answer, but wagered a guess that the US Treasury Security Average was “probably” the same as the Federal Reserve Rate.   I was dumbfounded.


So, I ask the powers that be…What is going on at Citibank??  Where are the people in charge of policing lending practices on behalf of the consumers???  Have I simply misread the daily headlines reporting that millions of homeowners are losing their houses?  Have I misunderstood this crisis to be due in part to our lenders pushing ill-advised loans in exchange for a quick buck?   In spite of all the mournful rhetoric, it appears that little has changed in terms of stopping this behavior or protecting citizens.


My advice for consumers is to remain highly skeptical, when considering any offer from lenders!!   To protect your future, you must arm yourself with the terminology and facts about your present loan.  Take nothing for granted.  Force your lender to prove the numbers that justify their recommendations.    

FAQ:  No lender can honestly recommend refinancing as an option, without first knowing how the old and new loans compare.   Before you are lured into buying a new loan, spending thousands of dollars in closing costs, know what the future pay off will be versus the cost.  Then and only then, can you make an

informed decision.The numbers won’t lie, but never assume others don’t or won’t. 

Thank you for visiting .  Please check in with us tomorrow, when we demystify the Adjustable Rate Mortgage Loan.


As always, please send your questions or comments to