Impulsive mortgage decisions cost borrowers

Don't assume FHA loan is a better deal than conventional

Along with many other observers of the mortgage scene, I have long attributed the imperfections of the market in large part to information asymmetry — the fact that borrowers have access to less information than the loan originators they deal with. Borrowers enter the market once or a few times in their life, whereas originators are in it every day.

The obvious remedy for information asymmetry is to level the playing field by requiring lenders to provide borrowers with the information they need, and this is the intent of the federal Truth in Lending Act and the Real Estate Settlement Procedures Act (RESPA), along with many similar state laws. While these efforts have all failed, I always attributed the failures to regulatory ineptitude: Regulators have overloaded borrowers with useless information while omitting what borrowers really needed.