Released: June 23, 2007

Mortgage forms sow confusion

Source: Kenneth R. Harney, Washington Post (Free Registration)

With mortgage delinquencies and foreclosures soaring, federal researchers have identified a key contributing factor: Many borrowers simply do not understand their mortgages - especially subprime loans that come with complex features and costly penalties.

As a result, too many people are ill-prepared to handle jolting payment hikes and rate-reset deadlines.

In a study involving 819 recent prime and subprime mortgage customers in 12 locations around the country, the Federal Trade Commission found that, using current truth-in-lending and good-faith-estimate disclosures:

· Nearly nine out of 10 borrowers could not identify the correct amount of upfront charges connected with a loan.

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