Nearly half of homeowners with adjustable rate mortgages admit that they do not know how their ARMs adjust or reset, and nearly three- quarters do not know how much their monthly mortgage payments will increase when they do, a new national survey reveals.

The survey, conducted Sept. 13-25 by Peter D. Hart Research Associates for the AFL-CIO, reveals that ARM holders are generally not concerned about mortgage payments until their rates reset. Then anxiety sets in as they realize their payments have risen substantially. The use of ARMs for home financing has grown dramatically over the past few years and particularly among higher risk subprime borrowers.

While many homeowners with ARMs remain personally optimistic, 62 percent said they believe escalating mortgage rates are hurting their communities, and 48 percent expect they’ll have to cut back on everyday expenses like groceries, clothing and gasoline when their payments increase. For families earning $50,000 or less, that number is 80 percent.

Asked if they feel confident or worried about making their monthly mortgage payments over the next few years, 41 percent of homeowners whose ARMs had reset said they were worried, compared with 18 percent of those whose ARMs had not reset. Among borrowers with incomes under $50,000, 59 percent were worried, including 38 percent who were very worried.

"What we have here is a tale of two communities," said AFL-CIO President John J. Sweeney. "The trap door between the American Dream and the American Nightmare for these homeowners is the ARM adjustment. This survey shows that many homeowners simply are not prepared for the steep rise in mortgage payments that this market inflicts on ARM holders."

The poll shows that of those homeowners whose ARMs had reset, 37 percent had interest rates at 8 percent or higher, above the current market rate for prime, fixed-rate loans, and 16 percent had interest rates at 10 percent or higher. After the reset, the average increase in monthly mortgage payments is approximately $291, a 10 percent cut in after-tax pay for a family earning $50,000 a year.

Sweeney and Leslie Tolf, president of Union Privilege, provider of benefits for union families, appeared in a news conference today in Cleveland to announce the launch of a model homeowner education program, including a Union Plus Save My Home Hotline. It will provide information and advice to help union members and their families avoid foreclosure. The AFL-CIO also sponsors a trust to assist union members with financial hardship due to disability or unemployment.

The Save My Home Hotline will provide free, confidential advice 24-hours-a- day, seven-days-a-week from the counselors at Money Management International, a nonprofit, HUD-certified housing counseling agency. Face- to-face counseling is available at more than 100 local offices in 22 states and the District of Columbia. Union members and their parents and children can call the hotline for advice at 1-866-490-5361.

"Nearly four out of 10 homeowners in the poll say they wouldn’t know who to turn to for help if they had difficulty paying their mortgage," Tolf said. "Unions are at the forefront of closing that gap." The AFL-CIO also sponsors a trust to assist union members with financial hardship due to disability or unemployment.

Two in three (64 percent) of those whose rate has reset do not recall their lender telling them how much more their payment would increase, and 32 percent don’t recall being told when their interest rate would increase. Twenty-three percent of all respondents said they had been late making a mortgage payment at least once in the past 12 months. And that proportion jumps to 37 percent among those whose rate has increased.

The poll also found substantial support for government action to protect consumers.

Fifty-one percent said they think the government should assist people with ARMs facing foreclosures, and 77 percent said the government should do more to regulate the mortgage industry.

"Predatory lending practices not only involve sticking consumers with bad loans, but also in failing to provide homeowners with the basic information they need to survive in this market," Sweeney said. "Our poll shows that consumers are looking for government help, but the labor movement is not waiting. We’re reaching out to union families to make sure they don’t fall through the cracks."

Despite a general lack of understanding about their adjustable rate mortgages, 79 percent said they believe the information they received from their lenders was mainly accurate and truthful. Sixty percent said they got their ARMs from mortgage brokers, and 39 percent said they got their mortgages directly from banks.

"There is a big disconnect between what people know, and what they think they know," Tolf said. "That’s why we believe homeowner education is so essential. Sixty-one percent of those who have been late paying their mortgage in the past year don’t know where to turn for help. These are people who need help the most."

The Save My Home Hotline will provide needed advice to homeowners who are behind in their payments, already in foreclosure or looking for advice in how to budget and restructure their debt. "Ideally, we can reach homeowners before they get in trouble," Tolf said.

Contact: Scott Treibitz (703-626-1407), Carissa Cardone (202-369-0699), Alison Omens (202-637-5018).