When was the last time that you read a rental car agreement? In a similar vein, the Federal Trade Commission announced a survey that showed many borrowers simply do not understand their mortgages. As a result, too many people are ill-prepared to handle jolting payment hikes and rate-reset deadlines. Nearly 90% could not identify the correct amount of upfront charges connected with a loan, 80% had trouble understanding why the stated interest rate on the loan note was different from the APR highlighted in the truth-in-lending disclosure, 66% couldn’t figure out a prepayment penalty, and 25% could not correctly identify the total amount of settlement costs. In the survey borrowers said that they were confused by the disclosures, cost, terms, and that they had no idea of their loan costs until they went to closing.

Mortgage prices are doing a little better this morning (+.125) after last week's sell-off. Last week, after all was said and done, rates were up roughly 20 basis points and mortgage prices were worse by almost a point. There is very little news until Thursday (see below) although Fed Chairman Bernanke's is speaking tomorrow. Any talk of a Fed ease this year is pretty much gone from the market, and the market is looking for short-term rates to stay put. Mortgage rates, on the other hand, have shot up. Remember that the central bank has only limited control over day-to-day changes in rates that home buyers pay – those are moved more by long-term economic trends and the supply & demand of securities. Locks were volatile, but many lenders reported a continued slow down in volume.

A loan officer died and went up to St. Peter at the Pearly Gates to present himself for admittance to Heaven. Peter said, "You did a lot of good helping people get into homes and you donated lot to charity and worked on that Habitat house. But you told too many fibs to the underwriters and were unkind to your processor. We aren't sure where you are going to fit. So we've decided to show you around both Heaven and Hell and see where you feel more comfortable.”

As they toured Heaven, the loan officer really liked the big mansions and the streets paved with gold, but the harp music got on his nerves. Then when they showed him around Hell, he noticed everyone had their choice of playing golf or tennis, hanging out by the pool, smoking and drinking, or dancing and playing cards in the clubhouse.

He told St. Peter, "Oh, this is going to be hard! Can I sleep on it?"

So he was allowed to think it over during the night. The next morning they asked him for his decision.

He quickly replied, "Oh please send me to Hell!"

So they opened up the doors to Hell, but the whole picture had changed! It was just like you have always heard with fire and brimstone! People were burning and being tortured and screaming! Oh it was so hot and horrible!!
"Hey, that's not what you showed me yesterday!!" the loan officer cried.

St. Peter's cold reply:  

"You should have locked-in yesterday!"

Week of July 09 - July 13