ARM Adjustments Put Focus on Portfolio Retention.(adjustable rate mortgages)

JACKSONVILLE, FL -- Keeping adjustable-rate mortgage clients is a big concern as resets will cause their payments to balloon and possibly result in increased foreclosures. The smart application of technology can help ease borrower fallout.

Many borrowers of adjustable-rate mortgages are not financially prepared as their interest adjusts upward from a low introductory rate, according to the consumer advocacy group ACORN, which said in an interview with The Miami Herald that borrowers could face foreclosure as a result. ACORN pointed out that the problem is increasingly significant in low-income and minority communities, where a large number of minorities have turned to adjustable-rate financing in order to afford homeownership.

Nationwide, foreclosures triggered by "rate shock" are most likely in markets enduring economic troubles, such as the Rust Belt and the Deep South as well as in Florida, California and other areas where the residential market has been overheated. ACORN is pushing for regulation compelling lenders to ensure that borrowers can afford financing even after rate adjustments.

In fact, Credit Suisse reported a 141% jump in delinquent adjustable-rate mortgages over the past year vs. a 27% increase in fixed-rate mortgage delinquencies. Low-income or poor-credit borrowers traditionally encounter difficulties making their monthly payments, but the problem now also is affecting middle- and upper-middle-income borrowers who obtained interest-only, adjustable-rate, option ARM and piggyback loans to purchase homes they could not otherwise afford.

UBS AG reported that $137.5 billion in mortgages this year and another $524 billion over the next four years will see higher monthly payments due to interest-rate adjustments. Some borrowers can ...