Despite the specialty's robust growth in recent years, many potential and actual borrowers have only a sketchy idea of what mortgage brokers do, often confusing them with bankers and other lenders.
To quantify excessive peer punishment, I conduct a lab-in-the-field experiment with actual microcredit borrowers in rural India.
This satisfied neither banks nor borrowers, actual or potential.
Bank of America, for example, issues preapprovals only after a borrower's actual loan application has been accepted.
Recently, the Mexican central bank issued regulations that forced credit providers to clearly state the actual amount that a borrower will pay in interest, commissions, and fees, and Compartamos is making a better effort to explain hidden costs to clients.
Some of these include requiring lenders to take steps to ensure borrowers can repay their loans, by way of setting rates and terms that are based on the borrower's actual ability to make payments, and restricting lenders from attempting to collect payments from individuals' bank accounts.
In January, as lenders and mortgage-servicing companies began to ramp up efforts to modify loans, about half of the 93,000 workouts for subprime borrowers involved actual modifications.
Some evidence on this question is provided in Slide 7, which shows illustrative initial monthly mortgage payments for a median-priced house for different types of mortgages.14 The interest rates used in calculating these payments are actual averages for prime borrowers for the period from 2003 to 2006, as provided by Freddie Mac.
