People don't read the paperwork now: why would they read yet another page of paper? Fully 1/3 of those with a house loan don't know whether they have a fixed rate or adjustable rate?
Why am I not surprised? People are dumb. My only concern is minimizing the adverse impact of their "dumbness" on my personal situation.

Here's a news flash: all of those things are already included in both the initial disclosures a loan applicant signs as well as the final closing paperwork. Of course, all of this pertinent information is scattered across dozens of poorly-designed goverment forms, but it's all in there.

I ma so sick and tired of hearing stories about poor, poor people who took out loans and had no clue what they were signing up for. Boo hoo, nobody told them it was an ARM that would adjust? Boo hoo nobody told them they have a balloon payment? Boo hoo. Screw them.

Nobody taught me about the ins and outs of mortgages either. But before I went out and borrowed $300,000 on my home I did some research. I found out what a LTV was and what points were and that you don't have to pay them and what an ARM is, etc, etc. I also shopped around various lenders and asked A LOT of questions about every $1 that was being charged.

All this knowledge was gained in a few days of browsing some financial websites. Actually if I recall correctly it was over a long weekend when I did all this research.

If people are so lazy that they won't even take a few days to get educated about the biggest financial decision in their lives, well then to hell with them. Let them foreclose, let them go bankrupt, they deserve it.

I totally agree that one more piece of paper is just another one the borrower will not read.
Here's a novel idea: start requiring a standardized test for loan originators. Why does the person cutting my hair have to pass a test and the person arrainging the financing of my home does not. Mortgage lending is immensely complicated and few people in the general public understand it. There needs to be a board of standards that oversees the practice...just like CPAs and Attorneys...

the lenders do this already. Its is
call a good faith estimate of settlement costs, plus another form titled a truth in lending form.
They cover all the questions here. Maybe the borrowers should read them.
These form are required on mortgage applications to be provided within 3 days of application.

Actually Lenders have been required to give that information within 3 days of application.
It is unfortunate that the Media and politicians are putting all the blame on Lenders and not the Homeowners - we have to take some of the blame

The question is: should we feel sorry for people who cannot read a document or do not know what they are buying, but still buy houses with loans that do not match their affordability? When I bought my first home, I read the whole set of closing papers the night before the date of closing, even after my lender and the builder of the house told me that I could not buy the house if I did not sign the papers. I wanted to know what I was getting into before taking a loan that was 2.5 times my annual salary.

Pat,
I think you should look at some items..LTV what if I bought in mid 2005 would you give me that value? Have you ever seen a 1003 or disclosure package? Amazing it is all there! Have you ever been to a closing and read a package? It is standard practice, do you know this? Or are you like everybody else, hear about a hot topic and get on your soap box and put propoganda out there. Maybe it is all their consumer debt, too much on health care, pay cut, and it could be a vast variety of issues but you choose to put it in one area which is not responsible journalism, give both sides. Everything was known and fine at the time selective hearing? selective memory? and selective reporting. Give the whole story, tell them it is all there and to read it, but don't say it is not given.

That info is available, most of it quite obviously. The problem is people don't read it and/or don't care. They just want to buy the house or grab any cash out of the equity they can. I feel sorry for about 1% of the people who take out subprime loans. Most know they can't afford the payments and want to blame others when it time to foreclose.

While we're at it, how about regulating what you can call the "interest rate"? What I've heard about seems to be complete misuse of it. For example, they say that the loan starts out at a "teaser rate" of 2% while the debt increases 8%/year (i.e., neg-am). In that case, the interest rate is 10%, not 2%. You should only be able to call something the interest rate unless it's the rate the unpaid balance accumulates. People have been using "interest rate" to mean something like "annualized ratio of current required monthly payment to original loan". That's not what an "interest rate" is, people!

All of this information is disclosed in the initial documentation and at the closing table. What needs to take place is a streamline of the documents the borrower signs at closing. This would eliminate the confusion by the borrower.

The problem comes from greed. You have people who are desperate to own a home because the "American Dream" tells them they have to. Unfortunately you also have brokers who are putting unprepared clients into loans that the client doesn't have a chance to succeed with. Had there been more dilligent licensing practices among banks/mortgage brokers (focusing on ETHICS) over the last few years, many of these issues we face now could have been avoided. Consumers need to accept the fact that they can't afford a home and take the necessary steps to prepare themsleves before taking on this responsibility.

The government designed Truth In Lending Disclosure and the Good Faith Estimate provide virtually all of the information suggested. However, they are so poorly designed that they are poorly understood by the public.

While some in the industry may have been less than perfect, it is the borrower who ultimatley holds responsibility for (at a minimum) having some understanding of the loan product they are getting and the financial commitment they are making. Personal responsibility still exists doesn't it?

I have been in the business for over 14 years now and the one thing that I am tired of is all the god forsaken disclosures.
All be it, I do agree that the summary of information would be helpful. The problem I have is that our loan documents now weigh 5 pounds and the borrower is information is diluted by all the legislative crap. Most is necessary and I approve of it. I have ran very large companies and I am a big proponent of full disclosure. The other problem I have is the fact the american consumer has turned into a "it's not my fault" society. It is impossible for a homeowner to make a statement such as I dont know what loan I got when by law it is overdisclosed and it is there responsibility to review these documents prior to closing. We give them more than ample time to withdraw and yet they dont but of course it is not their fault.
I dont think for a minute that the IRS and or the Police department would allow them to get away with the ignorance stance. It is their responsibility to know the terms and conditions of the contracts of which they sign. I am in favor of counseling and or a reduction in the disclosure package so as to stop the dilution of information. Please, spend more time interviewing the professionals who know what is going on if you are really interested in helping the situation. Obviously homeowners who sign contracts and then claim ignorance is probably not the best source for information.

You have no idea about this industry. First off there are many forms per Federal and state that explain them more then once but more like 3-4 times the same info. OVER KILL !!!
There is a 1003, autho, TIL and GFE that shows all this info. Not to mention all the other state disclosure.
FYI..No lender will accept the loan app with out all those forms signed. These are just a few of the many over regulated forms that now consist in a mortgage loan. The adverage is 20-25 documents in the "Pre Stage"
Please consult a pro with 19yrs in the industry before you made lood comments.

I strongly believe that the responsibility for the mortgage-related mess is largely upon the shoulders of the borrowers who should know better than to enter into loans that are beyond their means. Back in 2005, a real estate agent tried to pursuade me to purchase a house that was $200K higher in price compared to what I was prepared for. The agent's argument was that I could use an adjustable rate to obtain the loan, "flip" the house within 12-18 months at 20% higher resale price and "not worry" about paying a higher interest rate. Well, we all know now what would have happened 12-18 months later!

Borrowers, it's time to accept your responsibility! And, there is no such thing as an agent acting on your behalf! An agent only acts for himself/herself!

I agree with many commenters that due diligence on the part of the borrower is necessary. However, there are many unscrupulous loan originators (i.e. salesmen) who railroad people - often desperate people - through the process so they can make a quick sales commission. Maybe the loan documents weight 5 lbs now; so how much would it really add to put a coversheet on the thing that clearly stated all the terms without burying them in legalese? Only a scam artist would have a real problem with that.

Doesn't anybody remember the fine old saying, "There is no free lunch!" And here is one more, "Tired of paying for others ignorance!" It is painfully obvious the many failed mortgages could never have succeeded. There are many who have a already reaped in their profits on the foolish. Shamefully, we as a nation will suffer because of the greed and exploitation of the ignorant and lazy.

I suppose that the lender should not be held accountable? They are just as responsible as the borrower. What really is amazing is that they tell you the rate will adjust and of course your payment increases to whatever the top of the range is, why not base the loan requirements on the the highest point in which the interest rate can adjust to take a more conservative approach so that in the worst case scenario the borrower can still afford the loan even if it adjusts upwards to the max based on the current financial situation of the borrower. Why did they relax the underwriting requirements? Now here we are trying to find out who should hold the bag on this horrible subprime situation.