Save My Home Hotline Set Up for Union Members

Many homeowners have adjustable rate mortgages (ARMs)—but nearly half who have them admit they do not know how their ARMs adjust or reset, and nearly three-quarters do not know how much their monthly mortgage payments will increase when they do, a new national survey reveals.

The survey, conducted Sept. 13–25 by Peter D. Hart Research Associates for the AFL-CIO, finds that ARM holders are generally not concerned about mortgage payments until their rates reset. Then anxiety sets in as they realize their payments have risen substantially. The use of ARMs for home financing has grown dramatically over the past few years and particularly among higher-risk subprime borrowers.

Union Privilege, provider of benefits for union families, announced the results of the survey today, while in Cleveland, AFL-CIO President John Sweeney and Union Privilege President Leslie Tolf announced the launch of the Union Plus Save My Home Hotline.

As part of a model homeowner education program, the hotline will provide information and advice to help union members and their families avoid foreclosure. The AFL-CIO also sponsors a trust to assist union members with financial hardship due to disability or unemployment.

The Save My Home Hotline will provide free, confidential advice 24 hours a day, seven days a week from the counselors at Money Management International, a nonprofit, HUD-certified housing counseling agency. Face-to-face counseling is available at more than 100 local offices in 22 states and the District of Columbia.

Union members and their parents and children can call the hotline for advice at 1-866-490-5361.

While many homeowners with ARMs remain personally optimistic, according to the Hart survey, 62 percent say they believe escalating mortgage rates are hurting their communities, and 48 percent expect they’ll have to cut back on everyday expenses like groceries, clothing and gasoline when their payments increase. For families earning $50,000 or less, that number is 80 percent.

Asked if they feel confident or worried about making their monthly mortgage payments over the next few years, 41 percent of homeowners whose ARMs had reset say they are worried, compared with 18 percent of those whose ARMs had not reset. Among borrowers with annual incomes less than $50,000, 59 percent say they are worried, including 38 percent who are very worried.

Says AFL-CIO President John J. Sweeney:

What we have here is a tale of two communities. The trapdoor between the American Dream and the American Nightmare for these homeowners is the ARM adjustment. This survey shows that many homeowners simply are not prepared for the steep rise in mortgage payments that this market inflicts on ARM holders.

The poll shows that of those homeowners whose ARMs had reset, 37 percent had interest rates at 8 percent or higher, above the current market rate for prime, fixed-rate loans, and 16 percent had interest rates at 10 percent or higher. After the reset, the average increase in monthly mortgage payments is approximately $291, a 10 percent cut in after-tax pay for a family earning $50,000 a year.

Two in three (64 percent) of those whose rate has reset do not recall their lender telling them how much more their payment would increase, and 32 percent don’t recall being told when their interest rate would increase. Twenty-three percent of all respondents say they had been late making a mortgage payment at least once in the past 12 months. That proportion jumps to 37 percent among those whose rate has increased.

The poll also found substantial support for government action to protect consumers. Fifty-one percent say they think the government should assist people with ARMs facing foreclosures, and 77 percent say the government should do more to regulate the mortgage industry.

Despite a general lack of understanding about their adjustable rate mortgages, 79 percent say they believe the information they received from their lenders was mainly accurate and truthful. Sixty percent say they got their ARMs from mortgage brokers, and 39 percent directly from banks.

Says Tolf:

There is a big disconnect between what people know and what they think they know. That’s why we believe homeowner education is so essential. Sixty-one percent of those who have been late paying their mortgage in the past year don’t know where to turn for help. These are people who need help the most.

The Save My Home Hotline will provide needed advice to homeowners who are behind in their payments, already in foreclosure or looking for advice in how to budget and restructure their debt.

Notes Tolf:

Ideally, we can reach homeowners before they get in trouble.

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