It is vitally important today that you as a consumer check your facts and verify information that is being told to you. Unfortunately, the reason is not because mistakes can be made. I am seeing more and more examples of companies in the financial arena that are deliberately misleading consumers into thinking one thing when another actually exists.
Consumers have been running into trouble with these adjustable rate mortgages. Adjustable rate mortgages start out with low “teaser” rates for a period of time. Then the time comes when the payment and the interest rate changes or “resets.”
When these mortgages reset, the payment usually takes off. As a result, many consumers can’t make the payment and many have or are facing foreclosure.
We only hear about the mortgages that change for the worse. What about the ones were the payment changes for the better or the payment changes but is still bearable? If that happens, then the consumer could be set for at least another year.
In an article written by “Mike Mish” Shedlock, he writes that Citigroup is scaring people into refinancing their mortgages without giving them all of the information.
He sites an example where a recent letter sent out by Citigroup is encouraging this one consumer to refinance his mortgage because the mortgage is resetting. Of course, the letter is written as if the payment will go up.
The letter gives an example and shows the ARM adjusting on the date, the new interest rate, the new higher payment, and then compares that to a refinance. If you look at the data, of course it makes sense to just go ahead and refinance.
The problem is that the data was based on old rates. Given the old data, the mortgage payment would reset higher. Given current data, there would be no need to refinance because rates have fallen making refinance a bad idea. It wouldn’t make sense.
Nowhere in that letter is pointed out that his adjustable rate mortgage could be lower. There is obscure language that hints at it.
So, this individual calls Citigroup and asks the question:
Consumer: What happens to our loan on the anniversary? Will it go down?
Citigroup Rep: It is very unlikely that it will go down. Would you like to refinance?
Although no one is outright lying in this situation, there is a question of ethics. Remember, that you have to verify information and not just trust what you are being told.
