Mortgage Confusion

A survey conducted on behalf of the AFL-CIO yielded some surprising and ominous returns regarding what homeowners understand about their mortgages.

The survey conducted by Peter D Hart Research Associates questioned 500 homeowners with adjustable rate mortgages. It found that a majority of those surveyed fail to understand the most basic points of their loan programs:

• 18% of those surveyed don't know their current interest rate
• 20% don't know how their rate is determined
• Almost half (47%) don't know what factors will determine the amount of their rate adjustment
• 73% don't know how much their monthly payment will increase the next time their rates adjust.
  

Not surprisingly, many of the respondents expressed dissatisfaction with their lenders or loan officers:

• 49% say they aren't very informed about their mortgage terms and conditions
• 56% don't recall their lender telling them how much they would pay when their rate adjusts
• 40% say they don't know where to turn for help and guidance should they experience difficulty paying their mortgage.
• 77% say the government should do more to regulate the mortgage lending industry in order to protect consumers
  

In general, borrowers who obtained their loans directly from a lender or bank fared better than those who worked with a mortgage broker.

Not surprisingly, lower income borrowers were worse off than their high-income counterparts. Regarding their rate adjustment:

• 80% said they will likely have to cut back on essential items once their rate resets, compared to only 20% of high income borrowers
• 37% of low income borrowers said they may face foreclosure
• 18% say they may have to give up health insurance because of payment increases

Following the results of the survey, the AFL-CIO has announced a "Save My Home Hotline" 1-866-490-5361 to offer free advice and counseling from the US Dept. of Housing.