The existing system of mortgage disclosures in the U.S. has long been a disgrace. Borrowers are inundated with garbage disclosures and often the few pieces of critical information they need are either not there or concealed by the garbage. As an illustration, a large proportion of the consumers who took option ARMs (adjustable-rate mortgages) during the go-go years leading to the crisis believed that the initial interest rate, in many cases as low as 1 percent, held for five years. In fact, that rate was good for only the first month. Borrowers taking option ARMs received a booklet about ARMs in general, a description of all ARM programs in which they expressed an interest, and historical or worst-case examples of how ARMs work. But the one piece of information they needed to avoid a horrendous mistake was not there. The default rate on option ARMs today is horrendous, and it is expected to be higher next year. Too many cooks: A major reason why government-mandated mort...
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