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Sub Prime Prime Time

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.

Saving and Investing: Financial Knowledge and Financial Literacy that Everyone Needs and Deserves to Have!

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

Posted by Larry Morris, Oregon Mortgages on 03/28/2007 01:46 AM

Comments (12)

financial literacy

Originally posted at: Oregon Mortgage News: Sub Prime Prime Time

This post has been included in Oregon Information Washington County, OR Information Sherwood, OR Information

12 Comments on Sub Prime Prime Time

MAR

2007

Agreed. At a fundamental level, financial literacy is grossly lacking at many levels and in many communities. However, I can't help but feel that some financially 'literate' folks also got in over their heads during the boom....

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.

I agree. We need to make sure people understand what they are getting into.

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!!

Thanks Alex. I'm actually quite excited to get the training info and see if I can put into practise. I would imaging the local Community College would be a good place as well. Interestingly enough I met with 2 young ladies today who are African American. They are referrals from one of my best clients and are trying to buy his duplex to move into. They have some credit challenges and were very appreciative of the advice I gave. God willing they will be homeowners in about 6 months. They will be perfecet FHA or Expanded Criteria clients at some point.

MAR

2007

It is the one thing that I think we must do before closing a deal... make sure the person paying the payment knows what they are paying and what they are paying for.

I agree. I would go so far as to say that there should be a single, easy to explain for that lays out the details of the loan and that is initialed and signed. I've also started going to closings in order to answer any questuions taht come up.

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.

YEs. I agree. Basically what type of loan when it adjusts if it does, what the rates/payments will be..... If they are getting an ARM they really need to sign a short statement stating that they understand and agree. It might even be helpful to have a series of statements to check off indicating why an ARM. i.e. moving within a few years, lower interest rate with the understanding taht it will adjust....

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