The Law would also provide a penalty for a lender giving a “grossly unsuitable loan” While these things only seem like “the right thing to do,” it is obvious the system is inducing loan officers to do NOT what is in the interest of the public, but rather to do what is in the interest of the loan officer – pad his/her pocket.

Shortly after I began in the title business, I saw one subprime lender offering mortgages at a ridiculous rates to “help homeowners lower their monthly payments” by consolidating unsecured credit card debt into 30 year loans. At the closing they provided them with a credit card application. It was sickening to see them prey on desperate people then “help” them back into the same situation.

Is it that they are not taught fiscal responsibility? I was brought up in a home where if you couldn’t afford to buy something and pay for it NOW, you didn’t buy it. Credit was for those impossible things to pay for – unexpected medical bills, car repairs, etc. as well as for a house and car payment. NOT for buying toothpaste at Target.

I was always upset that high schools teach English, History, etc. but so very little on day to day finances. Good grief! Almost all of us want the American Dream – a house of our own. Almost all of us have mortgages. It is the biggest payment we make each month. Why don’t parents and schools teach their kids about use of credit cards and how mortgages work. Financial problems are the leading reason for unhappy lives, including divorce. We are doing an enormous dis-service NOT to teach basics our Kids, both by education and example about good financial responsibility!

“For example (similar to the Truth in Lending Law) is asks for “disclosing the maximum possible payment that could be due during the first seven years of the loan term,, which amount shall be calculated with reference to the maximum interest rate allowable under the loan, assuming no default…” Seems reasonable to me.”

I most certainly agree that this would be reasonable – in fact, I would say that it is prudent. However, I don’t think it would do much in practice. Subprime borrowers, in particular, do not care about their payment in the future. Most just want to get the loan; either they really want to buy that house that they can’t afford, or they desperately need to refinance to consolidate other debt that they cannot afford. You can explain what happens if the interest rate goes up, or what happens if they don’t make their payments, but all that they care about is “Can I get the loan?” and “How much are my payments NOW.”

In many cases, the payment on their new mortgage is irrelevant – no matter what ridiculous rate they are charged or how much they have in closing costs – it will be cheaper than the 6 maxed-out credit cards they currently have. Its a short-term solution to a long-term problem and they know that; so does their mortgage broker. However, their situation today leaves them with little choice and it will at least prolong the inevitable. And, predatory lenders know that – they understand that these people ONLY care about getting the loan and they will sign anything you put in front of them.