Mortgages: Americans Just Don't Understand Them
We’ve always said it, but now there is proof. A new study from Peter D Hart Research finds only 51% of the 500 borrowers surveyed say they are very informed about their mortgage’s terms and conditions; 18% of borrowers don’t even know their current interest rate; 25% don’t know when their lender will next be able to raise their rate; 73% do not know how much their monthly mortgage payment will increase the next time their rate goes up.
Now for the bad part: 40% say they do now know whom to turn to for guidance if they have difficulty paying.
I could ask, on this last one, why their lender doesn’t first come to mind, but the Treasury Secretary told us last week that the bulk of borrowers in distress don’t even bother to contact their lenders. Last week he launched a new effort with the nation’s largest lenders called Hope Now to try to encourage borrowers to seek help. The trouble is, as he admits, only half of people who do contact their lenders end up staying in their homes.
Interestingly today, Treasury Secretary Paulson ratcheted up the rhetoric, sending all the news wires flashing when he said in a speech at Georgetown Law: “But let me be clear, despite strong economic fundamentals, the housing decline is still unfolding and I view it as the most significant current risk to our economy. The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth.”
Now I know a lot of folks out there like to blame the media for reporting this story out of proportion, but those are his words, not mine.
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