Why don't consumers understand mortgage disclosures?

Mandatory mortgage information disclosures

In past blogs, (Next time you buy or refinance a house) and (Is deception profitable?), we have blogged about the the problems of mandatory information disclosure. Reuters reports on efforts by our favorite government agency to make the world a better place:

Research by the FTC found that half of the borrowers it surveyed could not identify their loan amount in mortgage papers. One-third could not identify their interest rate. Two-thirds did not know if their mortgages had prepayment penalties, a feature which can make refinancing effectively impossible.

"Consumers today do not understand the forms that they sign," said Marc Savitt, president-elect of the National Association of Mortgage Brokers. "All (loan) originators should disclose in the exact same forms and in the exact same manner. ... the FTC is right about this."

He is referring to research done by economists Jim Lacko and Jan Pappalardo to design a more consumer friendly mortgage disclosure form.