SOURCE: MIFSP

MIFSP

December 15, 2010 07:39 ET

Exploiting Financial Literacy Feeds the Biggest Mortgage Fraud of All, Says MIFSP

ATLANTA, GA--(Marketwire - December 15, 2010) - Several members chosen to sit on President Obama's newly created Advisory Council on Financial Capability have ties to banks and investment companies that provided false and misleading information to consumers nationwide, so says a book to be released by the Mortgage Institute For Financial Services Professionals, Inc. (MIFSP.org) titled "The Biggest Mortgage Fraud of All."

"It's ironic that some of the same companies 'The Red Report' identifies as having provided information that exploits the consumer's lack of financial knowledge are now sitting on the Council that's suppose to develop ways to close that knowledge gap, but it's also tragic that the consumer's hopes of learning how to avoid dire financial situations have been put in the hands of representatives from some of the very same companies that may have helped put them there," says a book excerpt. 

References were made to "The Red Report, When Banks Don't Compete" (available at mifsp.org and amazon.com), a report of a study identifying hundreds of banks and others discovered providing or directing consumers to seriously flawed mortgage calculators and calculations that significantly overstated and grossly misrepresented consumers' estimated tax savings from obtaining a mortgage. This could have distorted their view of housing affordability and suitability, according to the report.

The book identifies others chosen to sit on advisory councils or commissions during the previous administration with ties to entities in "The Red Report." The website for the Financial Literacy and Education Commission itself directed consumers to a faulty calculator. "Can you really blame financial literacy when homeowners rely on information that's been provided by trusted financial institutions and others they're suppose to be able to depend on," says Leon Morris, CLU, ChFC, FFSI, RMP, Executive Director of MIFSP and author. 

According to "The Red Report," banks touted success in converting consumers to "interested and motivated" mortgage applicants as a result of using these calculators. "Financial literacy maybe a stated goal of our society, but keeping consumers financially illiterate is extremely profitable for a lot of people," says Morris.

The book makes light of the role investment advice practitioners and broker-dealers are expected to play in the Council's financial literacy efforts. "It's no secret that most of these practitioners have been indoctrinated in a sales culture (insurance & investments). They're primarily paid by commission sales so the desire to educate may conflict with the will to sell, thereby creating an inherent conflict of interest. Expecting these practitioners to be the linchpin for financial literacy is like letting the fox guard the hen house. There's one sure way to shine a bright light on financial literacy, and it's laid out very simply in this book. If you don't learn about it, you'll just continue feeding the biggest mortgage fraud of all," says Morris. 

About MIFSP: MIFSP provides research, education and consultation services to the mortgage and financial services industry and offers the only educational program in Mortgage Based™ Financial Planning.