Skyrocketing Mortgage Payments Threatening Homeowners

The popularity of adjustable rate mortgages and the housing boom of recent years put lots of people into new homes; but with mortgage interest rates rising, many homeowners are suffering from "sticker shock," finding that their monthly mortgage payments have gone up hundreds of dollars. People are falling behind, and over a million foreclosures throughout the country have put the mortgage industry in crisis.

One problem is teaser rates, interest rates kept artificially low for an initial period followed by a steep jump that results in a mortgage payment dramatically higher than the beginning payment. The impact on homeowners and the mortgage industry has become so serious that Congress is looking into the problem, honing in on the literally thousands of different types of mortgage instruments, some very complicated, that the prospective homebuyer has to try to understand before making a decision.

It’s clear that clarity is needed in the mortgage industry, and perhaps new regulations will follow after the House and Senate hearings are finished. Meanwhile, it seems sensible for lenders to disclose, not just the initial monthly payment the consumer will face, but the payment that may be required if the loan’s interest rates hit their maximum. Ethically the lender should provide that information, but if it doesn’t, the prospective homebuyer should demand it.