An ARM can mean many things to many people – a limb, a gun, or – if you’re a nerd – a Larry Nevin story.
But here in Cleveland, ARM tends to have a much more unsavory connotation. Here, an ARM, or adjustable rate mortgage, is synonymous with foreclosure and destitution, thanks to the fact that ARM loans have interest rates that adjust up and never down, sometimes ballooning into the double digits and padding a borrower’s monthly payment by as much as $300.
Unfortunately, most Clevelanders who take out ARM loans have no idea how dangerous they can really be, according to a study released today by the AFL-CIO. In fact, only one out of every four ARMs borrowers were aware of what an ARM loan was when they took out their loans.
In today’s Plain Dealer,
however, Mark Seifert, director of the East Side Organizing Project
, says that the real situation for most Clevelanders is much more grim than the AFL-CIO study suggests. And Seifert should know. Each year, his nonprofit helps roughly 1,600 borrowers stuck in ARM loans.
He says that 95 percent of all ESOP clients didn’t understand the terms of their ARM loans, thanks to unscrupulous mortgage brokers who failed to disclose the facts.
However, this isn't news to Scene. In October 2005, we told the story
of Howard Jackson, a quadriplegic veteran whose ARM loan ballooned from $500 a month to well over $700. Jackson lives off a fixed income of $1,073 a month. He claims that his broker never told him that his mortgage rate would increase. ESOP eventually helped Jackson get out of his ARM loan and into a fixed rate mortgage.
Don't say we didn't warn you. -- Denise Grollmus