It's An Election Year; Will Interest Rates Drop Again?

Q: I have a four-year-old adjustable-rate mortgage that's gone up from the low 6 percent range to its current 8 percent. Should I lock in now, or because this is an election year do the experts think rates are going to go down?

A: Sorry to tell you, but David Lereah, chief economist of the Mortgage Bankers Association in Washington, D.C., believes the year's lowest rate occurred in February. Then a 30-year fixed averaged 6.94 nationally, and now it's over 8 percent, Lereah said about a week ago. As for election-year effects, he says the Federal Reserve usually works to keep rates low if it can. "The problem is right now the timing isn't there. There's upward pressure on rates, and the economy is stronger than anticipated. My projections are that we are at the end (of the upsurge) and that rates will turn down again, but we won't have the levels we had in February."

Q: Last month my mortgage payment was lost in the mail. I didn't receive a late notice until two days before the end of the month. It warned that if payment, plus a $60 late fee, were not received by the end of the month it would go on my credit report. I was told that even if the missing payment did show up they wouldn't consider the date on the envelope and I should send a new check and late payment. Shouldn't I have longer than two days to investigate this matter before a mark goes on my credit report? What are my rights?

A: Based on the facts you gave, Federal Trade Commission attorney George Zweibel doubts you have protection under the Fair Credit Reporting Act. Thus what your mortgage company can or can't do hinges on your written agreement with them - and that's about it legally. However, Zweibel has several common-sense suggestions for you. First, check with your bank to see if your check has been cashed. Sometimes companies cash them but miss crediting the payment. Second, don't just phone; write to a company honcho explaining your situation and asking for reconsideration. "In a situation like that many companies will waive the late fee," Zweibel says, adding "they're probably more willing to believe you're telling the truth if you put it in writing." Third, check your credit report (you can do this for free) to see if it has a black mark. If so, you have the right to have a written explanation attached.

Q: I'm temporarily disabled and as a result expect I'll soon have difficulty paying my full mortgage payment. Are there any special programs for people like me?

A. Sorry, there's no deep-pocket programs out there to help folks like you meet their mortgages. So Nancy Chermak, First Mutual Bank vice president and president of Seattle Mortgage Bankers Association, recommends the first thing you, or anyone who has an income drop, do is contact your lender. "Many times people are hesitant to do this, but it will give them insight into how flexible their lender can be," Chermak says. This is important because situations like yours are handled on a case-by-case basis.

In general, Chermak recommends you do everything possible to keep your mortgage payments up because mortgages are considered the most serious form of credit. "Being late on a credit card won't affect your credit worthiness as much as being late on a mortgage," she says. Do you have a home equity line of credit you can tap? How about help from relatives, friends, your church, employer or labor union? Also consider cash advances on your credit cards.

If you still can't meet the payments, your lender may be willing to grant you forbearance, meaning you can pay reduced payments without fear of foreclosure. Eventually you'll have to make it all up, and perhaps pay late fees. And if you go this route, be aware that your credit report will reflect the fact that you were late on your mortgage, which could affect future credit.

Home Forum answers readers' questions every Sunday in the Home/Real Estate section. Send your questions to Home Forum, Seattle Times, P.O. Box 70, Seattle, WA 98111, or call 464-8510 to leave questions on Home Forum's recorded line. The e-mail address is erho-new@seatimes.com. Sorry, no personal replies.