In this blog we have bemoaned the financial ignorance of many consumers, and it is clear that ignorance makes it easier for fraudsters to practice their trade. But if we don't penalize consumers when they make mistakes, what incentive do they have to learn?
Often borrowers did not even realise that their monthly payment would rise if interest rates went up, says Mr Bryant. Subprime borrowers on adjustable interest rates, whose mortgages make up just 7% of the total, accounted for more than 40% of the foreclosures begun in the fourth quarter of last year (see chart).It is also not clear to me that these foreclosures were the result of ignorance rather than rational speculation.
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