Commissioner Thomas E. Hampton of the DC Department of Insurance, Securities and Banking today issued a consumer alert urging homeowners with adjustable rate mortgages—especially those with nontraditional mortgages—to plan now for the scheduled “recasts” or “resets” of interest rates in the year ahead.

The advisory urges borrowers to:

• Seek information on the characteristics of your mortgage
• Budget accordingly
• Contact your servicer for assistance, if needed
• Inquire about the terms of any prepayment penalty
• Ask about possible solutions if payments are past due

The advisory notes that nontraditional mortgage loans and many subprime loans frequently feature a recast (or reset) with a significant payment increase.

DISB also issued an industry letter encouraging mortgage servicers and providers to reach out to consumers to provide information on their loans and to work with consumers to avoid foreclosure.

“Servicers should provide information on when the recast will occur and how much the monthly payment will adjust,” said Commissioner Hampton. “Should the loans go into default, servicers should consider workout arrangements to prevent foreclosures.”

Commissioner Hampton noted the efforts by the NeighborWorks organization, which has established a hotline (888-995-HOPE) to reach struggling homeowners with strategic solutions.

Consumers can find a copy of the alert on DISB’s website*. Or call DISB at (202) 727-8000 if they have any concerns about their mortgage payments.