Abstract
Complex disclosures have been recognized as a major source of borrowers’ poor understanding of mortgages. We examine the effect of simplifying mortgage disclosures on loan outcomes in a difference-in-differences design by exploiting a significant regulatory change of mortgage disclosures in 2015. Using loan-level data from Fannie Mae and Freddie Mac, we find that inexperienced borrowers pay significantly lower interest rates after the disclosure regulation relative to experienced borrowers, suggesting that simplifying these disclosures reduces borrowing costs. In addition, we find that the effect of disclosure simplification is stronger for loans originated by lenders disciplined by regulators and for loans originated in states with more registered originators, suggesting that simplifying disclosures lowers borrowing costs by curbing predatory lending and facilitating borrower shopping. We further find that disadvantaged borrowers benefit more from simplified disclosures. Last, we do not find that simplifying disclosures affects loan performance.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
