Got an ARM? You May Be Paying Too Much!

WARNING... More and More Mistakes!

Of the approximately thirty million mortgages in the U.S. about one-third are the variable or adjustable-rate variety. In fact, over the past three to five years, in many areas of the nation, sizable majorities of homeowners who refinanced their loans chose the ARMs when choosing new loans. However, during this time, rates have steadily increased which has caused payments to sharply rise for many borrowers. In addition, there is presently an especially serious situation for borrowers of so-called sub-prime loans who have seen their payments skyrocket in some cases. This has caused a surge in foreclosure rates among this type of loans. All this makes it so important for borrowers with ARMs to find out if they have been overcharged.

Adjustable rate mortgages (ARMs) involve changing index values and computer calculations that invite human and software errors. You probably took your lender's figures at face value. But The Wall Street Journal, MONEY, Forbes, Newsweek and other leading publications have been warning consumers that miscalculations occur in up to one-half of all such mortgages.

Fact: Recent studies report that typical ARM overcharges range from $700 to $2,000

You may have been overcharged if your lender selected the wrong index value, rounded the figures incorrectly or improperly credited extra principal payments. You should be especially concerned if your original lender sold the loan or is now out of business, if the loan has a rider/addendum or if the balance seems too high.

The calculation of ARM rate changes is complex and errors can occur in a variety of ways. For example, a borrower can be overcharged if the payment was based on: selection of incorrect index value, type or date; incorrect mathematical rounding procedure; incorrect monthly payment factor; incorrect margin or general mathematical errors; mistyped data, computer software or ambiguous loan note.

In fact, a simple miscalculation of just one-half of one percent in the index value, coupled with incorrect rounding can easily add $100 to the monthly payment, or $1,200 on an annual basis. Even with a sophisticated computerized system, clerical errors can occur when the data is initially entered. Errors can occur in any mortgage, but particular attention should be paid if the loan has any of these characteristics: the loan was sold or transferred to another lender; the loan was written before 1986; a rider, handwritten changes or irregularities exist in note; an unusual index or interest rate is determined by complex calculations; the loan balance has not decreased as expected; the original lender is now out of business.

Fact: You are entitled to a refund for mistakes

Since 1985, my firm, Loantech has uncovered overcharges from $500 to more than $38,000!

Fact: You can even claim a refund on an ARM you've already paid off

Many people have recently refinanced their homes, switching form adjustable rate loans to fixed-rate loans. Smart move. But if you were overpaying on your old ARM, you can still claim a refund. Isn't it wise to find out?