Sub-Prime Mortgages seem to be the big lump of coal in everyone's real estate stocking this year. But the credit mess that started in sub-prime migrated to all sorts of different places, to traditional mortgages with big "respected" lenders, to international finance, to Wall Street, to China... you name it, the ramifications of sub-prime are everywhere.

Because your credit is now global credit, and because finance is a marketplace ruled by market forces, some very interesting developments are beginning to unfold. If you or someone you know got in over their head with an adjustable rate mortgage and they are looking down the tracks at a major rate adjustment and payment increase in 2008, they should take action right now. Where they should take action might surprise you:

They should start with their existing lender, whether that lender is Option One or New Century (big, messy sup-prime players) or Wells Fargo (still falling into the more "respected" lender category, but with a lot of exposure nonetheless). This strategy only applies to borrowers that:

• Are current
• Have never been late
• Plan on staying put in their home for at least one year
• Have time and patience to play a tenacious game
• The ability to talk pure sugar over the phone... to a decision-maker

1. Contact your lender. Have your balance ready, your account number, pen and paper, proof that you have never missed a payment and a sweet tone of voice. You want to speak to whomever you can, ask them a couple of questions, get their name, phone extension and mailng address and then pose a simple request: "Given my strong history with your company, I'd like to have my interest rate reconsidered and fixed. Please transfer my call to your supervisor or another decision-maker so I can discuss this with them."
2. Whent he call gets transferred, STAY ON THE PHONE. You can always hold, you never want voicemail. Speakerphone is a great option. Whenever you get the supervisor, get their name and phone extension. Pose the same question. Be prepared for no. ASk a second time from a different angle. If you get the same answer, this is key, be sweet and thank them for their time and consideration, expressing how satisfied you've been with your home that they've let you buy. THEN CALL THEM AGAIN THE SAME DAY NEXT WEEK.
3. Persistence pays off: send a letter documenting the call to all the individuals you spoke with on a CC. You have to do this the same day you make the call, because when you call back the following week, they'll already have received the letter.
4. Repeat this process weekly for a month (that's four calls and four letters). By then end, you are the squeaky wheel, the cream that rises, whatever: of all the loans facing adjustment that will never stay current, you are the one of many who is reasonable and worth their time.

Lenders are facing investor pressures to re-configure their portfolios. If these rates adjust and they all stay current, it's obviously a gold mine for the lenders. But 15% of sub-prime's are in receivership (they wre about 1 in 7 loans last year). So there is no way that these will stay current. Additionally, most of the lenders make most of their money on origination. With the rate of foreclosures spiking, no investor will lend money to a sinking ship. So they have to do something. The best place to do something: move their good customers that they can continue to make money on from Pot A (sinking ship) to Pot B (still floating ship).

Since very few of my clients are faced with this problem, there's a good chance that this strategy does not apply to you... but it may apply to the person in the cube next to you at the office, a nephew or a friend somewhere else. With 2 million mortgages expected to adjust in the next 12 months nationwide, lenders will be faced with a much bigger problem if they don't take preventive actions of their own. This opportunity DID NOT exist 90 days ago, and it is possible that with the recent wave of panic applied to the markets about credit availability that those that initiate the process, rather than accept what they're offered, will come out better in the long-run.