There’s no doubt that many foreclosures are a result of mortgage brokers not educating their buyers on the type of mortgage product they were buying. Brokers seem to neglect explaining the downsides of adjustable rate mortgages or balloon mortgages, and the huge risks involved. Education involves more than just providing the required pamphlets and documents, it means the teacher should make sure the student understands the material. It’s the job of every mortgage broker to educate their buyer on the products they are selling; both the good and the bad points.
Every product has a good side and a bad side. For example, adjustable rate mortgages have a very low introductory interest rate. For a first time home buyer, a 4% interest rate sounds much more appealing than a 8% interest rate. Even though the rate can adjust much higher, buyers are sold on the idea, because the mortgage broker claims that he’ll personally refinance the loan before it adjusts to a higher interest rate. He doesn’t explain that the buyer may not be able to afford the home at that time, because of the higher interest rate. Credit scores and income may also need to be higher at that point, in order to get an affordable interest rate. The law only requires a few pamphlets and a signed statement at closing; no real education is required. It’s a fact that this lack of education is a direct cause of the foreclosure problem, but is our country’s education system, or lack thereof, playing a much larger role in the overall state of our economy?
According to the PISA (Program for International Student Assessment), in 2006, American students only scored higher than 5 out of 30 countries. This means that 83% of students taking the test scored higher than or at the same level as Americans. The PISA measures the students ability to use knowledge of math, science, and reading in real world scenarios.
Our education system is getting worse every day and this directly correlates to our nations economy. At one time, our nation was the pinnacle of our worlds education system. It was a great privilege to send your children to school in America. Today, there are many countries that can provide a better education, and even provide better jobs after graduation. This also make foreign educated employees a better choice for many companies. By opening businesses abroad and outsourcing our labor to other countries, our CEO’s have made it very clear that they will hire the most qualified (and cost effective) candidates, regardless of how it effects our economy. Business leaders and politicions are suffering from our nations lack of education and we are seeing the results today in our economy. These leaders of our nation are making financial decisions that effect us all, but as it turns out, a 15 year old student in Korea may be better qualified!
To add to the crisis, it’s estimated that the health and education of over 2 million children will be effected by families losing their homes to foreclosure. When a child is uprooted from their home and their school, their physical and mental health will suffer. Children forced from their home experience behavioral problems, such as increases in violence and will have a higher drop out rate than children from stable households.
It seems we may be stuck in a never ending loop. If our lack of education is causing foreclosure and foreclosure is causing a lack of education, what can we do to make it stop? As the government continues to cut interest rates and devise bail out plans, it’s imperative for them to remember the children. Children are the innocent victims of foreclosure and the future of our nation will depend on their wellbeing and education. Keep your children’s education in mind at election time; vote for candidates who care about stopping foreclosure and repairing our country’s education system!