Tuesday, March 21, 2006

Who do you trust?

Most of my loan clients don’t have a clue about the minute details involved in obtaining a loan. That’s not all bad. I have no idea about a lot of things. I have discovered that the more stuff I have and do the less I know. I don’t really understand how my computer works. It allows me to do a few functions but I have no idea how it does what it does. Car engines were much easier when I was going to college. I was always working on my car. Now I can’t figure out how to change a wiper blade.
There are some details I just don’t really want to know. Just give me the bottom line. Does it work? Are we making money? How does it taste? Will I live?” My CPA and Financial Planner produce more reports than I have time to read. Try to read an insurance policy or a credit card agreement. No one reads all the loan documents, so it isn’t surprising that a lot of people haven’t a clue about their adjustable rate mortgage according to a new study by the Federal Reserve Board.
The study found that about 35 percent of people with adjustable-rate mortgages didn't know how much the rate could increase at one time, and 41 percent weren't sure of the maximum rate they could face. About 28 percent didn't know which index of interest rates would be used to determine their adjustments; many others gave incorrect answers, such as the consumer price index or "the going rate."

Adjustable-rate loans accounted for about a third of mortgages granted in 2004 and 2005, up from an average of about one-quarter in the 1990s, according to the Mortgage Bankers Association, a trade group based in Washington. In recent months, however, the rise of short-term rates has greatly reduced the attraction of ARMs, and more borrowers are choosing or switching to fixed-rate loans.
I have found that many successful people (who know even less than me) surround themselves with people they can trust. They depend upon them for their expertise and take their advice. And that’s a comforting feeling.


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