Half couldn't identify the loan amount!

Today's LA Times report of a study by the Federal Trade Commission confirms what many observers may have suspected about mortgage lending disclosure during the housing boom a couple years back - even if home buyers cared about the price they were paying, they had only a fifty-fifty chance of finding it on their loan documents.

"Mortgage disclosures designed more than 30 years ago can be confusing even for simple loans, and they do not address the variety and complexity of today's mortgage products," FTC Chairman Deborah Platt Majoras said in a statement.
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This has been especially true with increasingly popular but complicated products such as "option ARMs" — adjustable-rate mortgages that let borrowers choose their payment amount each month and can even increase the total amount they owe on their loan.

The FTC doesn't have jurisdiction over loan disclosures, but it decided to examine them after many borrowers complained to it of deceptive tactics used to sell them home loans.

The agencies that do oversee mortgage disclosures are the Federal Reserve and the Department of Housing and Urban Development, which respectively monitor the nation's truth-in-lending law and the law governing real estate settlement procedures. Both agencies agreed that home loan disclosures were too complex and said they were working on solutions.

The study found that half the borrowers couldn't identify the loan amount, 90 percent couldn't figure out the upfront costs, and two-thirds couldn't find the prepayment penalties.

On a positive note, eighty percent knew what the monthly payment was - at least the initial monthly payment.

Elsewhere in the LA Times, the mystery of buoyant Southern California median home prices is now being unraveled by Annette Haddad, one of the better reporters on the SoCal housing market over the last few years.

In the graphic accompanying a story that follows yesterday's release of May home sales, it's easy to see how a free-fall in lower priced home sales can skew the median.

Since the median is the point "above which and below which half the values lie" it should be clear in the charts above how, as individual home prices may have been falling broadly, the median can fail to reflect the decline if the number of sales of lower priced home is plunging relative to the sales volume of pricier homes.

This should confirm what many observers may have suspected about neighborhood home prices where the price patterns have been at odds with the median price trends for some time now.