What people see when they read home loan disclosure forms

A new study uses eye-tracking devices to look at what people actually see when they read mortgage documents:

Choplin, along with Debra Pogrund Stark, a law professor at John Marshall Law School, and DePaul graduate student Mark LeBoeuf, conducted three eye-tracking experiments on 50 people to see if the various changes made to the government-mandated home loan disclosure forms made it easier for people to understand and retain critical information.

Their research found that the forms introduced in 2010 were generally better than the 2008 versions, so long as consumers are given the chance to read and digest what they’re reading. Their findings showed that people are much less likely to recall the initial interest rate, the maximum interest rate and the maximum monthly payment if they are distracted…

“The problem is if people are talking over it,” Choplin explained. “We believe mortgage brokers are initiating (the conversation).”

But even with silence and better forms, consumers still aren’t protected from potentially predatory lending, the researchers concluded.

That’s because they found that while better disclosure forms might alert consumers to changing interest rates and payment terms, none of the people in their study commented on how an adjustable-rate mortgage might affect the loan’s future affordability.

This sounds like an innovative way to use eye-tracking software. And it looks like the new forms do help some. But, perhaps they don’t go far enough in pushing consumers to ask the right questions about what it all may cost down the road. Simply seeing something on the page is helpful but doesn’t necessarily lead to comprehension and the next logical questions.

It would be interesting to then ask the mortgage brokers why they talk while people are trying to read the forms. A malicious answer is that the brokers don’t want people to consider them too closely. Or perhaps it is that the brokers, like a good number of people, have a hard time keeping silent for even more than 5 or 10 seconds. I’ve seen this in action many times myself – if you try to give a bill or form to sign a good look over, it seems to make the people waiting for you nervous even though the form is supposed to help you be better informed.

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