J. Michael Collins (email@example.com) is an Associate Professor at University of Wisconsin-Madison.
Protecting Mortgage Borrowers through Risk Awareness: Evidence from Variations in State Laws
Article first published online: 20 FEB 2014
Copyright 2014 by The American Council on Consumer Interests
Journal of Consumer Affairs
Special Issue: The New Era in Consumer Protection Regulation
Volume 48, Issue 1, pages 124–146, Spring 2014
How to Cite
COLLINS, J. M. (2014), Protecting Mortgage Borrowers through Risk Awareness: Evidence from Variations in State Laws. Journal of Consumer Affairs, 48: 124–146. doi: 10.1111/joca.12034
- Issue published online: 27 MAR 2014
- Article first published online: 20 FEB 2014
- Manuscript Accepted: 26 OCT 2013
- Manuscript Revised: 30 SEP 2013
- Manuscript Received: 13 FEB 2013
In the wake of historic levels of mortgage defaults, regulators have debated how to regulate certain high-risk loans because of the risks of foreclosure involved. This study examines state laws that required loan applicants to receive information about the risks of foreclosure before they could sign certain mortgage contracts. Skeptics suggest that disclosures are largely ignored by consumers, yet controlling for other factors this study shows that loan applicants in states with enhanced warnings about foreclosures were more likely to reject high-cost refinance mortgage loan offers from a lender. Enhanced disclosures with features such as risk warnings, signatures, and referrals to counseling are being implemented as part of Dodd–Frank consumer finance reforms. This study suggests these strategies may be useful to balance consumer protection and access to high-risk credit.