Protect Your Good Credit

In 2003, congress passed a law for Fair and Accurate Credit Transactions entitled Financial Literacy and Education Improvement. This law called for the establishment of the Financial Literacy and Education Commission. The Commission established and sponsors/hosts the website www.mymoney.gov. This website is essentially an index or a collection of links to other Departmental websites containing consumer information–some of it is useful, but consists largely of static text, the content of which is general in nature and requires the reader (1) to be highly literate, and (2) to do further, extensive research.

National Strategy for Financial Literacy-2006 and, subsequent addendum, clearly calls for more consumer education, but stops short of defining the means by which to do so. This is in spite of the presence of a number of financial literacy training advocates among the Commission’s working groups.

Treasury Secretary Henry M. Paulson, Jr. spoke on October 16, 2007 at the Georgetown University Law Center on Current Housing and Mortgage Market Developments and stated,

“…Let me be clear, despite strong economic fundamentals, the housing decline is still unfolding and I view it as the most significant current risk to our economy.”

In the later half of his speech, he makes a number of statements which, inside the beltway, are considered a clear “call to action.”

“We need simple, clear and understandable mortgage disclosure. We must identify what information is most critical for borrowers to have so that they can make informed decisions. At closing, home buyers get writer’s cramp from initialing pages and pages of unintelligible and mostly unread boilerplate that appears to be designed to insulate the originator or lender from liability rather than to provide useful information to the borrower. We can and must do better.”

“Borrower’s have a responsibility as well. Mortgage providers must offer clear, transparent and understandable information on the mortgage products they sell. And home buyers have a responsibility to use that information. Buying a home today is a complex process, but than in no way excuses home buyers from their obligation for due diligence. Just as investors in the stock market have a responsibility to understand the risks associated with their investment, home buyers have a responsibility to understand their mortgages.”

“…we need to bring a higher level of integrity to the mortgage origination process. The development of a uniform national licensing, education, and monitoring system for all mortgage brokers is worth considering.”

It takes little effort or imagination to connect-the-dots from the Financial Literacy and Education Improvement Act of 2003 to the National Strategy for Financial Literacy of 2006 to Secretary Paulson’s comments, delivered just prior to a well-publicized meeting with the G7 Finance Ministers.

On October 22, US Representatives Brad Miller (NC 13th), Barney Frank (MA 4th) and Mel Watt (NC 12th), introduced HR-3915-The Mortgage Reform and Anti-Predatory Lending Act of 2007 in the House Financial Services Committee, where Rep. Frank presides as Chairman. This could be cause for concern if regulatory action, once implemented, becomes burdensome and costly to both the industry and consumers.

While the overarching problem effecting the mortgage industry is diverse and disparate in its origins, implementation of (1) a well-managed certification and accreditation program for mortgage professionals, (2) paralleled by a concerted effort to lift the veil of complexity on mortgage-buying for consumers, are an essential part of any solution whether devised by government or industry, and will serve to keep us from repeating this situation again when the market returns to good health.

This entry was posted on Monday, November 5th, 2007 at 9:42 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.