This paper, presented by Carolina Reid at the Family Financial Security Symposium in April, 2010, raises significant implications for consumer protection and access to credit going forward.  Interviews point out how much of the mortgage origination decision is driven by local contextual factors, and that many consumers— especially those that have historically not had access to credit—are not well equipped to navigate all the information and institutions that are associated with the mortgage market.

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If our goal is to continue to provide access to credit to underserved borrowers, multiple interventions are necessary to ensure that this credit helps to build assets rather than strip them.  At the borrower level, there is certainly more room for financial education and counseling that can improve mortgage outcomes.  While some of this should include standard homeownership counseling curricula, it seems that consumers might also be well served by a better understanding of the political economy of the mortgage market.  In most aspects of the home‐buying transaction, incentives are not aligned in the interest of the borrower.  The borrower’s real estate agent earns more if the house sells for more rather than less; the mortgage broker earns more if the loan is priced above par.  Being aware of incentive structures can help borrowers be more aware of the context of the advice they are receiving, and may encourage them to do their own research on mortgage products and prices.