Quote Originally Posted by OakLeaf View Post
There are a lot of things that went on on that front, but high among them:

- Unsophisticated borrowers. And really, define "sophisticated." I took Real Estate and Consumer Law in my second year of law school, but never practiced in the former area. I doubt whether I really understood a lot of what was in our mortgage papers, for the simple fact that the common meaning of the language isn't necessarily the legal meaning. Someone without a lawyer or legal training would probably be completely at sea... someone without high-level language skills, forget about it. And our current educational system isn't producing a lot of people with high-level language skills. Most borrowers (in the recent past anyhow) were likely going to trust what the lender told them about what their payments would be, what the future held for interest rates, etc. And in many cases, what the lender told them was completely false.

- Lack of sophistication about facts of life other than mortgage papers. There are many, many people in my area who bought houses in the town where they were born, even though they knew they would have to drive 75-100 miles a day to get to work, but believed that this was a sustainable way to live. The media, their employers, their education, nothing disabused them of this idea. Now that the price of gas is beginning to approach its real cost (or at least was, before election season), they literally can't afford to get to work. Something has to give, and just selling their house and moving closer to work doesn't happen that easily even in the best of markets, let alone now. Never mind the emotional issues involved to a person with a strong sense of home.

I do believe in the abstract that people can help themselves, but they have to know how, first. If you're not born into a family of a certain level of sophistication, there are d*** few resources that truly help people learn to understand their surroundings and manage their lives in a real way. Yes, there are resources that help people be better employees, better cogs in the machine; very, very few that help them understand the "Matrix" and break out of it. And there's a reason that those resources that do exist are vilified by the "powers that be" to the extent that many of the people who need those resources the most are afraid to take advantage of them.
Current place of employment have highly educated staff down to those without high school diploma. Current work place has 2 of us with advanced engineering degree. Mine is from an Ivy league the other guy has his from Stanford and Caltech. 5% of of the workforce has masters in engineering 15% has BS degree. Then we go down all the way to the unsophisticated workers who do low level work like visual inspection (may not have high school diploma/GED I don't either but that's another story)...

They the "unsophisticated" drives in a Hummer, Merceds, BMWs which they can not afford. They sign lease on these cars. We try to straighten them out but its usually after the fact and ink has already dried. The unsophisticated always tell us the guy who rammed the loan down their throat is a nice guy and they trust the loan officer and that the loan officer was looking after their best interest ... So unsophisticated here implies gullible.

Yet even I have problem on the language of the contract. I read B2B engineering contracts occasionally . Customers have a boiler plate contract and so do we. These we understand without too much difficulty. It's pretty straight forward contract, things you learn in first year law (contract law) but the mortgage loans and credit line Oh myyy... I have to say here I would have to claim unsophisticated because the thing is soo convoluted and I have to take notes... even the preamble is soo convoluted. They give me huge migrane.

Loan brokers hate me because I always insist on taking the contract home and reading it. When I refied my loan about 5+ years ago to a 15 year mortgage, he casually mis-typed the loan rate. He said just sign it and he'll fix it. We exchanged some pretty good words. He guessed very wrong. I didn't sign. Loan brokers like to fast talk. I tell them to be quiet! because only thing that matters is the contract and I've told them that they are annoying and distracting me from reading the contract.

Sooo, to me, anyone not directly involved in writing and originating the contracts then you are unsophisticated. They made it that way.