re: Mortgage Law - can I sue over this?

[Aerta]

Here's a bit of background. We financed our townhome through First Franklin with a 2/6 LIBOR ARM - two years to first adjustment, 1 percent cap per adjustment period, 3 percent lifetime cap at 7.875 percent.

They sold the loan to HSBC, who sold it to Citibank 6 months ago when the first adjustment was due. The LIBOR had actually gone DOWN so they adjusted it to 7.75 percent.

Since this time in October 2007 we filed Chapter 13 BK - we were only behind on the mortgage by 1 month - we merely knew that was a miracle and went with the BK to prevent things getting out of hand.

Since then, we have paid our mortgage monthly like CLOCKWORK. They send us a new mortgage statement for the adjustment period beginning in Feb 2008 stating that our mortgage would go up to 11.85 percent!!!!!!! 1 percentage point past our lifetime cap???

How can they possibly do this and what can we do? Can we sue them for breach of contract???

A

[Robert Nashville/Savannah]

Unless there is some funny stuff in the law in your state, they can do only what the contract says they can do; nothing more.

Re-read your contract and see what it has to say. If there is nothing in it that you feel would allow this interest rate change then call them, it may be a mistake.

If you can't resolve over the phone then get an attorney as you are looking at tens of thousands of dollars in additional interest (meaning an attorney is well worth the expenes).

[Aerta]

Well, considering I helped structure the loan, I know that regardless of the cap, the LIMIT they can up the interest in any six month period is 1 percent above what they were charging us duing the previous cycle. Period.

So 4 is a bit excessive LOL I will contact my lawyer.

What really blew me away was that they sent me this at all. The paper ITSELF shows a clear violation - so 1 page is all I need in court!