A case for financial literacy as long-term solution – son of prominent vice chairman of a major US Bank almost took out a 1M loan (800k first from Countrywide, and a 200k second from Countrywide), with a pick-a-payment clause, where the lowest payment was $1900 per month payment, negative amortization loan. 50k negative amortization per year maximum for four years, or 200k maximum negative amortization for life of the loan. In short, the loan would hit a wall within approximately 4 years, when his son would have had to sell the property for a profit, or increase his salary by 80%. Countrywide sold these first mortgages into secondary market as A paper, and sold the second to some other investor. This was a college educated son of a vice chair of a major bank. This IS now the texture of a lot of the current crisis today. Middle class, not the poor. Long-term, only financial education is the answer here.
John Hope Bryant, founder, chairman and CEO, Operation HOPE
Vice-chairman, US President's Advisory Council on Financial Literacy