Truth in Lending Act Failed the Subprime Borrowers

This paper argues that one cause of the current economic crisis was that the federal Truth in Lending Act failed to provide mortgage borrowers with the tools to determine whether they would be able to meet their loan obligations, and that as a result many borrowers assumed loans on which they would later default. The paper first explores the disclosures for adjustable rate mortgages-which were commonly used for subprime loans—and explains how those disclosures misled borrowers about their monthly payments.

Author: JEFF SOVERN

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