A few years ago, I went to a Joint Center for Housing Studies sponsored conference at the Harvard Business School. While my memory may be faulty, the broad outlines of the following story are true.
During a discussion for the need for consumer protection, a Harvard Law Professor (it may have been Elizabeth Warren, but I am not sure) asked those in the room with an Adjustable Rate Mortgage to stand up–perhaps half the room did so. The professor then asked how many of those standing could name the index to which their loan rate was tied. Those who didn’t know were asked to sit down, at which point half of the original group remained standing. The next question was about the size of the margin between in the index rate and the loan rate, at which point another half sat down. Finally, those who remained standing were asked if they knew roughly the maximum payment that they could make on their mortgage–only one person remained standing (and the person sitting next to me said, “I know that guy–he would never admit that he didn’t know something in public anyway.”)
So here is the point: a crowd of Harvard, Yale, Michigan, Princeton, etc professors and top policy makers did not fully understand the mortgages they had. How can we expect someone armed only with a high school diploma and no consumer finance training to knowledgeably negotiate the world of mortgages?
I used to cringe at the thought of imposing “suitability standards” on lenders. No more.
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Hello,
My sister just completed a nightmare scenario that started with Countrywide six months(yes, 6 months) ago and ended with Bank of America rejecting here loan based on a bogus claim!(She has all the docs)
She missed the low rates during the winter, could affect her credit and she’s out several hours of work and a $400 appraisal. She has 60% equity, 750 plus credit and good income ratios. Countrywide said “there was a bad zip code on her title report” after 6 months of telling her it’ll close soon!!
Please help if you can-this is an injustice and I thought we were putting this kind of unethical behavior behind us. Her name: Shelly Johnson (360-513-6666), single mom and had never refi’d before.I’m an educated professional that reviewed her docs and have been through several refinances-what I’m telling you is the truth and we have the docs to back it up!
Thank you for your time and consideration.
Steve Johnson (360) 225-6596
While regulation of the mortgage indurstry is crucial, regulations alone will not protect the consumer! The best protection is knowledge! In my book, “Getting To Closing” (www.CherylLPeck.com), I give readers information I gave my clients during my ten years as a mortgage broker. The book is a step-by-step reference guide for the loan application and closing process. No more surprises at closing!