According to a new study which ran in the Yale Law Journal in April, roughly one-third of new homebuyers didn't understand that the interest rate and monthly payments on their mortgage loans would rise.
The study, performed by Jessica Choplin and Debra Pogrund Stark, an associate professor of psychology at DePaul University and a professor of law at The John Marshall Law School in Chicago, respectively, concluded that more targeted counseling is needed to make sure consumers understand how their mortgage loans work.
The study used various methods to test the awareness of the homebuyers, such as visual sensory technology to track what exactly the participants were looking at on their contracts, and subsequently testing them on the details of their mortgage.
The study revealed that it is common for homebuyers to become distracted while reading their contracts, failing to remember much of anything they were expected to read. In fact, many of the test subjects simply skimmed the form to look for confirmation of what they had already been told.
Based on their findings, both researchers have proposed what they call "mortgage counseling interventions," focused on explaining the terms of the loan for which they have applied.
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