Adjustable-rate mortgage makes owner scramble for viable solution

Q: I am buying a home. I didn't know at first that I was getting this house on an adjustable ARM. Every six months my payment goes up. I have asked this company about refinancing the house to place it on a fixed rate. They say my credit score has to be 500 or better. The score didn't matter the first time they gave me the loan. The interest rate is up to 11.8 percent. Please advise me what to do. I need help on this one. -- S.B., Rochester, N.Y.

A: Your letter is a perfect example of the kind of thing we're hearing a lot about lately: Sub-prime (poorly qualified) borrowers getting sub-prime (high-interest) loans. When the borrowers can't make their payments, they lose their homes to foreclosures.

Then we hear lots of protests against what are called predatory mortgage lenders, those that take advantage of other people's misfortunes.

But at least that loan did let you become a homeowner.

All you can do at this point is scramble to make the payments so you don't lose the house, and work on getting your credit score up.

Do everything you can: Make payments on time, use cash whenever possible and try to pay the full amount on your cards every month. If you can raise your credit score to just 580, you should be able to refinance with a favorable FHA mortgage. You might try a more mainstream lender at that point. Just hang in there -- and I wish you good luck.

Credit debt necessitates

clearing out of house

Q: We are living in a house with a home equity loan, still owing on it and the condition of the house is now such that it is no longer viable for needed repairs. We couldn't sell it for enough to pay it off.

We don't know how to proceed to get out from under because if we take the debt forward we won't be able to afford rent or a mortgage on another place. We have owned the house for 25 years and paid off a first mortgage on it. The equity money was taken to consolidate debt from many events of compromised employments. We have a large amount of credit debt and a large debt on our overdraft coverage in our checking account. We still miraculously have a decent credit rating because we maintain payments, but we never get ahead because we only pay minimums. But the major first issue is how to get out of the house, as it has become unsafe to live here, in my opinion. -- B.M.

A: You don't say whether you've consulted any real estate brokers. Call three who are active in your neighborhood. Those are the people who can look over your house and give you the best advice.

The place may be worth more than you think. It may be in better shape than you think. If it isn't good enough for a bank loan, perhaps an investor might give you enough cash to pay off the home equity loan.

Give it a try. It won't cost anything and you have nothing to lose.

If that doesn't work, talk with your mortgage lender's "workout" department. Given your debt situation, it's possible you could arrange a short sale. With that, the lender agrees to cancel the mortgage in return for whatever you can sell the place for. Your credit report would reflect the arrangement, but it's a lot better than having a foreclosure. One drawback: Sometimes the IRS asks for income tax on mortgage money you once received and never paid back ("forgiveness of a debt").

Neighbor should be queried

about wooden stockade fence

Q: My next-door neighbor's wooden stockade fence is very dilapidated, with broken pieces sticking out with jagged edges, rusty nails and sections of the broken fence laying on the ground, some on my property. I am afraid to move the pieces, which are very heavy and full of slivers and nails.

My concern is that my grandchildren play in my backyard when they visit me. Also, some of the neighbor children play there because it's a big yard and I welcome them.

What do I do? Confront my neighbor, who obviously has no plans to clean up the mess, as the fence has been falling apart for more that a year? Could I call the village? -- S.P.

A: First talk with your neighbor. "Confront" is the wrong word -- explain your concerns in a calm and friendly manner. You might mention possible legal liability if a child is hurt.

Then if that doesn't produce any results, by all means discuss the matter with your village officials.

Edith Lank will personally respond to any questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (please include a stamped return envelope), or readers may e-mail her at ehlank@aol.com. Please visit her Web site at www.askedith.com.