The sub headline to this story reads: “Fraud, abusive lending crushes dreams for millions of home owners.”  The problem?  The article never mentions the “millions” of victims of fraud and abusive claims.

The article is fairly standard fare.  Any ills that befall people are not their fault, but rather the fault of nasty companies.

I’ll summarize the content.  A bunch of financially illiterate people got mortgages that they didn’t understand.  They signed up for things like adjustable rate and negative amortization mortgages.  They use such defenses to explain their plight as the true rate “was buried in the paperwork.”  God forbid they read the paperwork!  Here is a good rule of thumb: if you don’t understand the calculations involved in a financial contract DON’T SIGN IT!

Back to the “millions” claim.  The only portion of the article that mentions a group of people in excess of one million is on the second page.

For all of 2006, [a website that compiles default notices] logged more than 1.2 million foreclosure filings nationwide — or one in every 92 U.S. households, up 42 percent from 2005.

Obviously all of those foreclosure filings aren’t the direct result of “fraud and abusive lending” as the headline suggests.  Most either got in over their head or were overcome by life events.  On the same page is a graphic showing that there were 35,617 “suspicious activity reports” relating to mortgage fraud.  No where in the article is the number of “abusive lending” cases reported.  That is partly due to the nebulous definition of abusive or predatory lending.  If a lender lies to a borrower then that is abusive lending.  If the lender is able to convince a willing borrower to engage in a financial transaction that is not in his best interests then that is stupid borrowing.

Bottom line, the outrageous headline is completely unsubstantiated, but lots of people (maybe even millions!) will carelessly read it and assume lenders are running around skewering oblivious borrowers.

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This entry was posted by Brian on Tuesday, April 10th, 2007 at 7:59 pm and is filed under Media, Personal Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site. Please note the copyright policy.