Mortgage Question - Negotiation possible?

[Dr. Moreau]

I purchased a townhome last year, and took a subprime (7.5% interest) mortgage to buy it due to some poor credit decisions a few years ago.

According to my documents, I have until the 15th to pay it each month before it is considering 'late' and incur late fees ($100 ish).

I have no problem paying my mortgage every month, however I do wait until the 13th to send in the payment because I have no motivation to send the payment in earlier.

During the past few months, my mortgage company calls me on a few days before the 15th and want to talk to me about 'payment options'.

I am not behind in my payments, I pay more then my mortgage payment is every month to help pay down principal. I think they call me is because a computer flags me as being a 'problem customer'. Most of the time they call me I just point out to them I made my payment that morning. Usually the rep is apologetic and we end the call on a positive note.

My question is this... what kind of options are they going to offer me? Lower interest rate, refinance, etc? Should I even discuss this with them or just keep paying?

I wouldn't mind lowering my rate, but I stupidly took a prepayment penalty for 3 years so refinance does not make sense till 2009.

Just curious.

[ahnuld]

why not send out payment with post dated checks to end the annoying phone calls?

[Dr. Moreau]

[ QUOTE ]
why not send out payment with post dated checks to end the annoying phone calls?

[/ QUOTE ]

I am not really bothered by the annoying calls. I do pay online, using their web site and pay usually 2 days before the 15th.

As for post-dating checks.. not sure that is a good idea, I sent a check by mistake to Company X after I made it out to Company A... they deposited it without a problem. I do not think big companies pay attention to anything on a check except for the total amount.

I guess I am trying to 'angle-shoot' here with my Mortgage company, it is obvious they are just trying to make sure I am not going to default on my loan like most of their other clients.

[blackasthma]

My guess is they're calling you because your statement is actually going out just before the 15th of the month, and your statement incorrectly indicates you're 'behind' 1 month on payments.

I'm sure they'd love to discuss refinancing (i.e., 'options') with you. I don't know the type of loan you currently have (guessing a 3- or 5-year ARM), but they can probably cut your payments in half by putting you on what is effectively a short-term negative-amortization loan, called a pay option. Sounds like you're keeping this property awhile, so I would strongly advise against the pay-option and anything that even resembles it. I was a broker, and most sub-prime scum won't tell you this.

If your FICO scores are way up, you may legitimately qualify for a better rate on a 15 or 30 year fixed IO. You really need to weigh refi costs (fees) + prepay penalty vs. savings on the new loan. My guess is you're better off waiting until your first adjustment period kicks in. By then your scores have gone up, your prepay term is over, and you (hopefully) have stronger equity, which only gives you more leverage to refi. It doesn't sound like you're having trouble making payments right now anyway.

There's big turmoil in the sub-prime lending world, and lender guidelines are literally changing on a daily basis. You might not find a good sub-prime alternative right now. NOO investment properties carry higher rates anyway, so maybe you're better off sticking this one out for a couple more years. Then again, it never hurts to ask your lender what they can do.

[Dr. Moreau]

[ QUOTE ]
My guess is they're calling you because your statement is actually going out just before the 15th of the month, and your statement incorrectly indicates you're 'behind' 1 month on payments.

I'm sure they'd love to discuss refinancing (i.e., 'options') with you. I don't know the type of loan you currently have (guessing a 3- or 5-year ARM), but they can probably cut your payments in half by putting you on what is effectively a short-term negative-amortization loan, called a pay option. Sounds like you're keeping this property awhile, so I would strongly advise against the pay-option and anything that even resembles it. I was a broker, and most sub-prime scum won't tell you this.

If your FICO scores are way up, you may legitimately qualify for a better rate on a 15 or 30 year fixed IO. You really need to weigh refi costs (fees) + prepay penalty vs. savings on the new loan. My guess is you're better off waiting until your first adjustment period kicks in. By then your scores have gone up, your prepay term is over, and you (hopefully) have stronger equity, which only gives you more leverage to refi. It doesn't sound like you're having trouble making payments right now anyway.

There's big turmoil in the sub-prime lending world, and lender guidelines are literally changing on a daily basis. You might not find a good sub-prime alternative right now. NOO investment properties carry higher rates anyway, so maybe you're better off sticking this one out for a couple more years. Then again, it never hurts to ask your lender what they can do.

[/ QUOTE ]

Thanks for the good answer. I am indeed just happy paying my mortgage now and refinancing after my prepayment penalty is over. 3 years from now I should have a higher credit, as my one black mark (a write off on a credit card) will be off my report by then.

I guess I was hoping for a 'quick way to save a buck' thing, but for now.. I will keep paying my Mortgage as is and tell them to have a nice day.

As for the prepayment penalty, it is 6 months of mortgage payments... so I would rather wait until it is clear before I refinance.

[Jimbo]

[ QUOTE ]
I guess I was hoping for a 'quick way to save a buck' thing, but for now.. I will keep paying my Mortgage as is and tell them to have a nice day.


[/ QUOTE ]

In that case you should be making your payments earlier in the month rather than as late as possible, unless you are making better than a 7.5% return on your excess cash now. Since you are also making principal reduction payments I suspect that is not the case.

Jimbo

[blackasthma]

Glad I could help. The worst thing you can do is miss a mortgage payment. One day after 15th and it's on your credit report. Lenders weigh this factor heavily. You may not beat 7.5% right now, but ask around. First Option was a flexible subprime lender last I checked, and GB Home Equity specializes in 2nd mortgages, if you ever decide to go that route.

You and I are actually in very similar situations. I have a house I'm leasing with an option to buy, and there's a PPP as well. Right now it's negative monthly cash flow - what the hell was I thinking??? I'm still looking for more investment properties, via more 'creative' methods like subject-to and sandwich lease options.

Best of luck to you...

[Jimbo]

[ QUOTE ]
why not send out payment with post dated checks to end the annoying phone calls?

[/ QUOTE ]

Thought I should address this statement in case someone reads this thread and relies on the advice. There is no such thing as a "post dated check". It does not exist! A check is immediately negotiable the moment it is signed, the date is irrelevant. Call your banker and ask them what happens if you write a post dated check and it comes through their bank.

Jimbo

[blackasthma]

[ QUOTE ]
First Option was a flexible subprime lender last I checked...

[/ QUOTE ]

oops...I meant to suggest Option One Mortgage, not First Option. Probably doesn't matter, but I couldn't live with myself had I not corrected this.

-btw, I think Jimbo is right...

[pig4bill]

BTW Option One is teetering on the brink. Big layoffs and cost-cutting. If Cereberus doesn't save them, which many think they won't after their own mortgage company went bk Monday, they could go down the drain.