Last night I sat down with my 4 year old son and watched the House Finance committee discuss the subprime meltdown. Then I read the headlines. There were complaints of "no one giving a straight answer ' when the questions were leading. Headliners were thrown out by politicians seemingly looking for them.
Once again I was amazed at what was considered news and what was lacking. The most profound comments to me came from US Congressman David Scott. What he had to say was pretty much by-passed by the major media. In fact I searched on his name and the topic he discussed and did not get a single reference to todays hearings.
His profound statement did not place blame on the sub prime lenders, although many did and had reason to. It did not place blame on unscrupulous mortgage brokers, although they have had a part to blame. He didn't even place the blame on greedy borrowers.
What he suggested is that going forward we take a serious look at Financial Literacyin America, especially in the under-served minority communities. What a revolutionary idea!! Teach people to make wise decisions!! I applaud Mr. Scott. The problem is at hand and will eventually work itself out. What he proposes could very well prevent the next crisis from happening, or at least for those who take him seriously.
My challenge to us, real estate professionals and borrowers, is to get educated on Financial Literacy and to educate our clients. I'm not speaking of Fiscal Literacy, an advanced mortgage and financial planning strategy, I'm speaking of plain old common sense, financial literacy.
Below are several links to help you get started:
FDIC Money Smart an adult education program that provides free training. I sent off for the material and hope to partner with a Hispanic Realtor to teach this class.
MyMoney.gov website Title V of the Fair and Accurate Credit Transaction Act (FACT Act) established the Financial Literacy and Education Commission (Commission) with the purpose of improving the financial literacy and education of persons in the United States. Take their 20 question quiz and see how you did. I got 18 out of 20.
Here's a link to a book that will help as well. I haven't read it yet but will be purchasing it myself.
Here's an opportunity to be part of the solution instead of the problem.
Larry Morris is a loan Officer with Equipoint Financial Network in Newberg, Oregon. He specializes in relocations and Sherwood, Oregon neighborhoods. He can be reached at larry.morris@equipoint.com. His website is www.PDX-Mortgage.com. This material is copy protected 2007 by Larry Morris, Mortgage News that Matters. All Rights Reserved
Larry Morris is a Certified Mortgage Planning Specialist in Portland, Oregon. He specializes in USDA Guaranteed Rural Home Loans, FHA Purchase and Refinance, FHA 203k Rehab loans, FannieMae HomePath loans, Oregon VA Loans and conforming purchase and refinances in the states of Oregon, Washington and Idaho.
He can be reached at 503-421-0096.
Larry,
I commend you for this post! In fact, I flagged it to recommend it as a feature. More often than not, our legislative actions are knee-jerk efforts, band-aids thrown out to treat a wound. Often rooted in politics, lobbying and to often a facade of true concern. When the rubber meets the road for consumers on most issues it will ultimately boil down to something that is rooted in education. Financial literacy is paramount to to our way of life in hundreds of ways. What percentage of high school graduates can even do a respectable job of maintaining a checkbook? Financial literacy needs to be a part of the required curriculum in our high schools.
Kaushik - I agree. However, what many of the"financially literate" people needed was Fiscal literacy. Those that understood the risk and just got caught holding the house after the bidding stopped have only themselves to blame. But, many financially literate people still did not understands the complexities of the loans that they were signing for. Loans used to be simple. Now they can be extremely complex.
Ron - Thanks I appreciate that. For an experiment, Ask a clerk at your local fast food joint to make change. If the bill is $2.79, give a $5, 3 quarters and a dime and see watch what happens.
Christy - At this point, I pretty much stick with 30 year fixed or I/O unless I know that the borrower understands and can weather a changing marketplace. An option ARM is an incredible tool if used wisely. But it can be devastating if not. For years I have always quoted a 30 year fixed for sub prime borrowers and have yet to see one take it.
Larry Great blog my friend. I didn't even think about watching that since I am in the mortgage world. I just get the emails from mortgage daily and kinda go from there. Since I do 95% FHA I kinda don't even pay attention but I should
Ben
FHA has a lot of Financial Literacy built into it. I see teaching a Financial Literacy class as a wonderfuil way to give back to the community, shore up some relationships with other professionals, help place myself as an expert in my community and possibly generate additional business.
Think of it as an expanded 1st time homebuyers class.
Cool post, brother....I will look into those ideas you have posted...I am bookmarking this blog.....
THANKS!!
I agree and it's good to see someone else share this opinion. Everyone wants to throw the "loanmakers" under the bus. I agree that L.O.'s are responsible, but they aren't the only reason.
Financial education should start in high school. It must, actually. By graduation kids are already digging their credit card holes. It's baffled me that this hasn't become required study. Most people don't know what a budget is or how credit really works.
As far as the form, I'd be ok to see the TIL expanded to include the loan type with all the details. There are forms that already cover all of this but it may be better to condense it all. It makes sense that this information be included on the Truth In Lending form.