[wendyCA]

HSBC and now another mtg lender have excitingly described this type of loan which allows a person to get deducted interest rates over periods during which the mtg loan is paid as promised.

Is this a bait and switch tactic?

I have a 720 FICO but am two years out of CH13 (discharged 2004, completed).

I want to sell a home I live in (neighborhood is changing for the worst with unsavory people moving in and I am unhappy here) and owe 59,000 on a home worth about 200,000. A townhouse I am interested in is 230,000 and in good shape (will have home inspector go through it if I can find financing I am comfortable with). The mtg broker is telling me he can get a 6.1 fixed rate with pay-right option.

I really want to stay with Wamu and a conventional loan but the loan officers and mtg broken keep directing to these Pay-right mtg plans.

Is there someone here familiar with this? Thank you for your time.

[Dr D]

I have been doing mortgages for over 23 years. I don't claim to know everything, but I do try to keep up. A few years ago FNMA came up with their Expande Approval program for less than perfect loans. Depending on whether it is a Level I, II, or III, the rate is about .5% to about 1.5% higher than prevailing. On Levels II and III they offer a "Timely Payment Reward" program at an added cost (about .75 point). After two years of on time payments, the rate will revert to the lower level.

Considering that the going rate for a 30 year fixed mortgage is in the neighborhood of 6.625% (with 0 origination and 0 points), a starting rate of 6.1%, with the guarantee of going even lower, just sounds too good to be true. A prospective borrower whom I spoke with a couple of days ago said that he has a loan such as the one that you have described. He also mentioned that his loan has a Prepayment Penalty. In my experience, Prepayment Penalties are used by lenders to discourage borrowers from escaping a nast loan.

As Elmer Fudd has said so many times: "Be wewy wewy cawefull."

[wendyCA]

Thank you. I am in the dubious position of making a decision that could ruin my life!

Thank God for boards like these.

[wendyCA]

This explains in some detail the "pay right plan" or pick-a-pay plan as the broker called it. It sounds to me like it is avoiding paying the mtg so you can invest your money elsewhere. But, in reality, that is taking high risk with the one major asset most people own. I walked away from it. In case you are curious, here it is:

http://www.ripoffreport.com/reports/ripoff127829.htm