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Responsible Mortgages

Home buyers fall behind in their payments for many reasons, including falling house prices that can make it difficult to sell a home for more than the mortgage amount, not understanding the features of a mortgage, and over-committing available income. Unscrupulous marketing, in which buyers are steered into unsuitable loans, is an important reason for mortgage delinquencies, particularly among inexperienced consumers and those with little education. To reduce potential problems, lenders should provide applicants with clear-cut disclosures about potential interest-rate hikes, prepayment penalties and any other mortgage feature that can raise unanticipated costs. Where problems already exist, AARP calls on lenders to modify loans, in order to lighten the load on strapped borrowers. Foreclosure is a drastic measure that should be avoided in all but the most dire situations.

An Educated Consumer

Consumers need the best possible information to navigate a complex marketplace that features vast choice and a rapid stream of new technologies. Less-than-obvious costs should be clearly disclosed, as well as details about safety, service and warranties.

Consumers also should do their homework. In particular, we urge people to ask questions about the full costs and risks in any financial transaction, including reverse mortgages, home refinancing, and purchases of financial instruments. To help meet this need, AARP supports a major effort to enhance financial literacy.