ALEXANDRIA, Va. (3/4/08)—The National Credit Union Administration (NCUA) used National Consumer Week, designated as March 2-8 by President George W. Bush, as a springboard for a message to consumers about "good mortgage habits.” NCUA Chairman JoAnn Johnson, a member of the President’s Financial Literacy and Education Commission, said in a release Monday that it is crucial that consumers have useful and understandable information when making financial decisions—particularly the purchase of a home. Johnson outlined the following responsible mortgage habits for borrowers:
* Assess low fixed rates or very low payment amounts that may turn out to be valid only for an introductory period. Be aware that rates can rise substantially following that timeframe, which could substantially push up payment amounts; * Understand terms. Know that "low rate" could mean either the payment rate or interest rate. While the interest rate is the rate used to calculate the amount of interest a borrower will owe the lender each month, the payment rate is the rate used to calculate the amount of the payment the borrower is obligated to make each month. If the payment rate is less than the interest rate, interest due will not be covered and the loan balance will increase; and * Review all correspondence to ensure a lender is reputable and responsible.
Johnson noted that "financial education is an important step in helping consumers navigate the complex mortgage lending market. I encourage credit unions to continue proactive efforts to inform their members about these issues.” For more information, use the link.