Richard Thaler has begun a regular rotation in the Sunday New York Times as an Economic View columnist. This past Sunday, he made the case for “plain vanilla” mortgages as the default option when buying a home.
Once upon a time, choosing a mortgage was easy. Nearly all mortgages were of the 30-year, fixed-rate variety, required a 20-percent down payment and were devoid of tricky features like balloon payments, teaser rates and prepayment penalties.
Sensible regulation was easy in this environment. Congress passed what’s known as the Truth in Lending Act, which required lenders to report interest rates in a uniform way, using the now-ubiquitous annual percentage rate. Picking the best mortgage was no more complicated that finding the lowest A.P.R.
Fast forward to 2008, and the world of mortgage shopping had become a much more complicated place.
Read the column here, and look for his columns in the future.