Dear Forum Members

As I write this post in the UK I am aware that there are hundreds of thousands of homeowners in Cleveland, Ohio loosing their homes because they can't afford to pay their monthly mortgages. This tragedy has already started to cause a financial ripple effect that could plunge the world into another recession.

Here in the UK a bank/building society has had such a run on its finances that it had to be bailed out by the Bank of England. Mortgage rates and home repossessions have taken an upturn, and this translates into problems for the economy.

My simplistic understanding of how this started was when financial institutions/companies in the US started to aim their adverts at low income people who primarily wanted to own their own homes. And as most decent human beings would say there's nothing wrong with that.

However, these lo@ns that were granted, in most cases, were low starter lo@ns, i.e. for the first two years the lo@n rate would be fixed. And people who are loosing their homes are saying that this was never explained to them because they thought that they were getting long term fixed rate lo@ns.

Now, as an adult in the UK, I have personally come across lo@n arrangers, insurance salesmen etc. that cared more about the commission they were getting rather than my ability to pay back the lo@n or afford the insurance premiums being asked for. And I have also come across friends, co-workers and relatives who have no idea about mortgages, interest rates and how they work.

Therefore, I can only presume, based on limited info, that an army of unscrupulous lo@n arrangers sold lo@ns to people who did not understand the liabilities they were signing up for or were given time to seek an alternative view point of their contract.

In the UK when you sign up for anything you are given, by law, a 30 day cooling off period. However, as far as I understand, this may not be the case in most US states. For example, in the documentary I saw last night, this woman who was loosing her home, because she could no longer afford the mortgage repayments, was given her lo@n during her lunch break. She said that she was told either sign there and then or loose the lo@n, so she signed.

Initially, her mortgage was $625.00 per month, which she could afford but after two years when the interest rates started to go up and she found herself struggling. So when the monthly repayments hit $1,400.00 per month, which is more than double what she started out paying, she could no longer afford the mortgage.

When she was pressured into the lo@n she thought it was a long term fixed rate mortgage, which are not uncommon in the US, rather than a "low starter" where the interest "not paid" during the first and second years, i.e. normal interest rate minus the discount, are subsequently is added back into the following years.

As you can see from my previous paragraph, mortgages, lo@ns, interest rates can be complex things to understand.

However, I do believe that with complex financial contracts, e.g. mortgages, ordinary people should be given a set amount of time where they must consult a lawyer who can explain what they are actually signing up for.

At least with "independent advice" in place people would not loose their homes due to "not knowing", this would be good for America and good for the world.


UK Bob