Perhaps some might think the title is a tad harsh but with the lack of truth in advertising in this country it is every man or woman for themselves. We are stuck at this time right in the middle of the worst mortgage problem, most likely in history, and what do we get: innuendos,misleading statements and chicanery from some of our financial institutions. Wow! They didn't even let the body cool down before they are out trying to slay the rest of the public. And no one seems to care. We put warnings on cigarettes and alcohol but not on financial advertising. After all the first two are bad for your health, the latter is only harmful to your wealth!
But I can't just put the blame on those companies that are operating in this manner. They give you plenty of hints at what they are trying to do to you. The first, but maybe not the worst, tells you that you get to choose your payment. COME ON! Haven't you heard that joke a million times. Your in business or have worked for a business or at least bought from a business. Did you let the customer decide how he or she was going to pay, or did they let you decide? Wouldn't you just wonder, a wee bit, what is in it for them to be so kind to you? If you didn't you need to read my column from August 3, 2006 "Haylee wouldn't get it but you should". Why are they letting you do this? We will get to that in a moment.
There are three advertisements that are really egregious: two are on television and one is on the radio. They exhibit three main problems: 1) a negatively amortizing loan, 2) advertising one loan and making you think it is another and 3) giving a low rate and a high APR. In my industry, the mortgage industry, In my industry, the mortgage business, consumers should now be aware that lack of understanding can't be an excuse. We have an unprecedented waive of foreclosures, primarily from people who say they didn't understand. Whether you or I agree it doesn't matter as it already happened. What matters is the need to know, and not the need to polish up a good excuse while you wait and pray for help.
I briefly described how you are being enticed into the negatively amortizing loan. But there is a twist. They say it is a fixed rate! It is, just under 7%. How do I know that? They give you the size of the loan and then show you 4 ways to pay. The second way is interest only.
I took the monthly interest only figure and multiplied it by 12 and got the yearly figure. I divided that by the loan amount and that is the interest rate. Would you have paid any attention to the advertisement if they told you it was a fixed rate just under 7%? Nope.