New Mortgage Rules: Protection From Banks, or Ourselves?

The federal government’s consumer watchdog will introduce new mortgage rules today. They are designed to protect homebuyers from big bad banks. But they are also about protecting consumers from themselves, which is a slippery slope. Post-financial crisis, it’s deemed too much to expect individuals to read and understand a mortgage document. Dozens of studies suggest we are a financially illiterate society; attempts to teach people about all manner of credit and personal financial matters have largely failed. For our own good, then, the government must mandate “plain vanilla” products that a child could understand. So the Consumer Financial Protection Bureau is set to unveil standards for something called a “qualified mortgage.” If lenders meet certain criteria for simplicity and transparency, borrowers will have limited ability to sue for damages should things not work out. B...