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FTC Agrees: Mortgage Disclosure Is Poor

Posted by: Peter Coy on June 15, 2007

I wrote recently that federal banking regulators missed a good opportunity to clarify for borrowers how much different kinds of loans will cost them, especially ones with those highly misleading teaser rates.

Turns out the Federal Trade Commission is also concerned about the poor disclosure of mortgage loan information.

Two days ago, the FTC issued a study which found that:

**Half the 819 borrowers surveyed could not correctly identify their loan amount.
**Two-thirds did not recognize that they faced a two-year prepayment penalty.
**Three-quarters did not recognize that they were paying extra for optional credit insurance.
**Nearly 90% couldn’t identify the total amount of upfront charges in the loan.

It’s easy to blame the borrowers, and I’m sure some people who read this post will do exactly that. But when so many people can’t understand the loan documents, I put most of the blame on the lenders.



BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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