Housing Secretary Alphonso Jackson says he knows just how borrowers must feel when they’re caught off-guard by sudden surges in their monthly payments because they didn’t read the fine print in their contracts.
“I’m an attorney and I’ve had eight houses and I didn’t read all that mess. If I didn’t read it — and I doubt anyone around this table read it — then we can’t hold people responsible for not reading every line when they were closing their loan,” he told editors and reporters of The Washington Times this afternoon.
Many people with homes foreclosure say that they didn’t understand what they were getting into when they took out their loans. Mr. Jackson, while sympathizing with borrowers who were surprised by sudden changes in their mortgage payments, said certain people should be held more responsible than others.
He said he has no sympathy for people with high incomes and education who knowingly took out risky loans with backloaded payments. That is the reason why the Bush administration is not offering such people assistance in avoiding foreclosure.
“We’re talking about the yuppies. We’re not talking about a teacher, a fireman or policeman,” he said. “We had some people at HUD — very, very educated — they did that and they’re suffering at this point. We’re not going to help those people.”
The department estimates that about half of the loans in default and foreclosure nationwide were taken out by people of means who are not eligible for assistance under the department’s foreclosure prevention and insurance programs, which are aimed at lower-income homeowners.
Mr. Jackson said his own experience with not reading the fine print on mortgage contracts is the reason the department earlier this month proposed much stronger disclosures for borrowers.
The new rules would require mortgage brokers to inform borrowers early on when they’re shopping for loans whether their loans will reset at higher rates in a simple-to-read format.