Subprime borrowers coudln't put 2& 2 together

IF you can%u2019t divide 300 by 2, should you qualify for a loan? That is one of the questions raised by a new study led by a Columbia University assistant business professor, Stephan Meier, who found that borrowers with poor math skills were three times more likely than others to go into foreclosure. Mr. Meier conceded that the results were not shocking, but he said he had not expected the... [more]

IF you can%u2019t divide 300 by 2, should you qualify for a loan? That is one of the questions raised by a new study led by a Columbia University assistant business professor, Stephan Meier, who found that borrowers with poor math skills were three times more likely than others to go into foreclosure. Mr. Meier conceded that the results were not shocking, but he said he had not expected the connection between math skills and mortgage default to be so pronounced. About 340 borrowers in Connecticut, Massachusetts and Rhode Island who took out subprime loans in 2006 and 2007 were surveyed in 2008. None were in foreclosure. The respondents were asked five questions, with the first requiring borrowers to divide 300 by 2, and the second to calculate 10 percent of 1,000. (Since the survey was conducted by telephone, the questioners did not know who was using a calculator.) About 16 percent of the respondents answered at least one of the first two questions incorrectly. Mr. Meier said that the results were consistent among all levels of education and income. Over all, 21 percent of the respondents whose math abilities placed them in the bottom quarter of the survey experienced foreclosure, versus 7 percent of those in the top quarter. Mr. Meier said the fact that the borrowers in the sample had subprime loans %u2014 which in 2006 and 2007 were given even to those with dismal financial histories %u2014 did not lessen the significance of the findings. A larger survey in Britain, he said, found nearly the same levels of math illiteracy among those questioned about retirement savings. http://www.nytimes.com/2010/06/13/realestate/13mort.html?ref=business [less]