Mortgage Payment Woes??

I spoke to a woman in California today seeking Gov't help with her mortgage. She was in an adjustable rate mortgage (ARM) but her payment had not yet increased. Her interest rate was 5.625% and she was paying interest only.

She complained that her mortgage principle balance had not gone down and that her payment was too high. She wanted the Gov't to lower her payment and she wanted a fair share of her payment to be applied to principle. Her mortgage balance was approximately $325,000 and she earned about $45,000 annually. Mortgage help? Her lender, Bank of America told her that she did not qualify for a loan modification due to her income. I tried to help her see her real dilemna.

She didn't realize that she had an awsome interest rate and a ridiculously low payment. (Interest only). Notwithstanding none of her payment was being applied to principle, but she could voluntarily send extra money to that end. Sending more mortgage payment is not exactly the kind of mortgage relief she sought. She didn't realize that her two complaints were somewhat diametrically opposed to each other. Paying principle & interest with her mortgage payment does not necessari ly equate to a smaller payment.

I did some calculating for her and even if I gave her a rate of 4.5% on a 30 year fixed, her payment would still be higher than what her current payment was. She didn't quite understand. She simply was given the wrong mortgage. Someone qualified her for a mortgage she simply couldn't afford. Unfortunately, she will eventually loose her home.