QUESTION: My husband and I obtained an adjustable-rate mortgage in November 1983. The lender is a federal savings and loan association. In a couple of months, we anticipate that the rate will be adjusted, and we are not sure how this will be handled. Who can we ask to examine our documents to make sure there are no hidden costs?
ANSWER: It appears that many borrowers who jumped on the adjustable-rate-mortgage bandwagon last year will now face some form of adjustment.
Because of the fluctuating economy over this past year, and because it appears that the normal index used by most lenders will be up from last year, I suspect that most borrowers who have an adjustable-rate mortgage will find their monthly payments increased somewhat.
As this column has reported on many occasions, the very first place to turn when you have questions regarding your promissory note and deed of trust is to the documents themselves. If you have not received copies of the deed of trust and the promissory note you signed at settlement, I suggest that you immediately contact your lender and obtain them.
Most adjustable-rate mortgages contain language that states, in effect, that before the anniversary date of the mortgage, the lender will send you information regarding any change in your monthly payment. The lender also is required to give you the name and telephone number of a person at the lending institution who should be able to give you some preliminary information and answer some, if not all, of your questions.
I suggest that once you receive the announcement of any payment change, you contact the appropriate person at your lending institution and satisfy yourself as to exactly how the increase was calculated. Because the institution bases the increase on an index -- commonly one-year Treasury bills -- you have the right to obtain written information spelling out what that index was when you borrowed the money and what it is currently.
If you are still dissatisfied with the information furnished , or if you have any further questions, I suggest that you contact the Federal Home Loan Bank Board, the federal agency that monitors and supervises federal lending institutions. You also should consider contacting Fannie Mae (the Federal National Mortgage Association) or Freddie Mac (the Federal Home Loan Mortgage Corp.) if your loan was sold to one of them.
Finally, your own attorney should be able to assist you in analyzing the validity of any increase imposed by the lender.
It should be pointed out that the Federal Reserve Board periodically publishes the information on which your lender bases the index. You may want to contact the Federal Reserve Board's Office of Information here in Washington to confirm the index figures your lender has given you.
I strongly suspect that there will be strict compliance with the mortgage documents, especially because the adjustable-rate mortgage is under increasing pressure from consumer activists and Congress. However, because the adjustable-rate mortgage is relatively new, and we are now only beginning to see the adjustments from last year, some lenders may not fully understand how to calculate the adjustment, and a careful review of your own loan is highly desirable.
In fact, it is strongly recommended that all consumers who have an adjustable-rate mortgage carefully monitor their own loans to assure strict compliance by their lenders.