What Consumers Do Not Know About Their Mortgages
While we in the real estate blogosphere try to figure out why the mortgage crisis is not resolving itself, the reason might be staring us in the face.
The consumer never learned the rules of the game.
Real estate agents and mortgage brokers got so caught up in the frenzy of selling and doing deals that they forgot to educate the consumer. This let the honest people turn deals quickly but it also let the unscrupulous amongst us scam buyers.
Remember the Sy Sims line from the annoying ads, “An educated consumer is our best customer.”
Well, according to this study by the Federal Trade Commission, the typical mortgage buyer was not an educated customer, and now we are all paying the price for this lack of education. So take the extra time now to make sure your clients are being served and educated. It is in all of our best interests.
The study, put together by the Federal Trade Commission for the Federal Reserve, contained some startling statistics: Of those surveyed, 25% could not identify the annual percentage rate of their mortgage, and 25% could not identify the amount of settlement charges. Half could not correctly identify the amount of the loan. Two-thirds were unaware of prepayment penalties that could be charged during refinancing. Three-quarters did not recognize that the loans included charges for optional credit insurance. via Forbes.com
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Comment by Missouri Real Estate on 4 May 2008:
There is a lot of work that needs to be done in this area. From the “Good Faith Estimates” that are not worth the paper they are written on to form that are almost impossible to decipher.
The public also needs to take their share of the responsibility. It is an individuals responsibility to know what they can spend on housing. When we purchased our home, we told the banker what we could afford. Of course they kept trying to tells us to spend more. But it is the bankers job to sell loans, it is my job to stay in my budget.