AgentMortgage

A new watchdog, better home-loan disclosures

Part 6 of 6: The bad mortgage

(This is Part 6 of a six-part series. Read Part 1, Part 2, Part 3, Part 4 and Part 5.) Consumer groups believe that lenders should be held liable if they allow borrowers to take home mortgages that aren't suitable for them. Previous articles in this series concluded that a suitability standard was not an effective way to deal with bad mortgage selection, unaffordable loans, refinances that don't benefit borrowers, or overcharging. This article looks at suitability as a potential remedy for another remedy that has never worked properly: mandatory disclosure rules. The conventional wisdom, which I shared for a long time, is that government should formulate and enforce disclosure rules because that assures uniformity of disclosures across the market. But if the disclosures mandated by government are useless or worse, which is the case, uniformity does not help borrowers. Indeed, poor disclosures can be worse than no disclosures because they often lull borrowers into a false sense of secur...

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