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The Federal Trade Commission today released a Bureau of Economics report presenting the results of a study that found that mortgage disclosure forms fail to convey key mortgage costs and terms to many consumers. The study also concluded that better disclosures can be created to help consumers understand the costs and terms of mortgages to enable them to make informed decisions about mortgage products.

“Mortgage disclosures designed more than 30 years ago can be confusing even for simple loans, and they do not address the variety and complexity of today’s mortgage products,” FTC Chairman Deborah Platt Majoras said. “Although mortgage disclosures, alone, will not prevent deceptive lending practices, consumers who understand mortgage terms and choices are less likely to fall victim to these practices.”

The study examines how consumers search for mortgages, how well consumers understand mortgage costs disclosures and the terms of their own recently obtained loans, and whether better disclosures can help consumers understand mortgage costs, shop for mortgage loans, and avoid deceptive lending practices.

The study’s key findings include:

  • Current disclosures failed to convey key mortgage costs to many consumers, and better disclosures significantly improved this deficiency.
  • With current disclosures, both prime and subprime borrowers misunderstood key loan terms, and both groups benefitted from better disclosures.
  • For complex loans, where prime and subprime borrowers had the most difficulty understanding loan terms, better disclosures provided the greatest benefit.

The study was based on 36 in-depth interviews with recent mortgage customers and testing of disclosure forms with 819 mortgage customers. The potential for improving consumer understanding of mortgage costs was tested using prototype disclosures developed for fixed-rate loans, including those with interest-only and balloon payments. According to the report’s authors*, the prototype disclosures in the study could be extended to incorporate the key features of adjustable-rate, hybrid, and payment option loans.

The study demonstrates that better disclosures can significantly help consumers recognize loan costs, which can result in more efficient comparison shopping, reduced vulnerability to deceptive lending practices, and enhanced competition in the marketplace.

The Commission vote to issue the report was 5-0.

* The authors of the report, “Improving Consumer Mortgage Disclosures – An Empirical Assessment of Current and Proptotype Disclosure Forms,” are James M. Lacko and Janis K. Pappalardo of the FTC’s Bureau of Economics. The view expressed in the report are those of the authors and do not necessarily represent the views of the FTC or any individual Commissioner.

Copies of the report are available from the FTC’s Web site at and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad.

Contact Information

Media Contact:
Office of Public Affairs
Staff Contact:
Pauline Ippolito,
Bureau of Economics
James Lacko,
Bureau of Economics
Janis Pappalardo,
Bureau of Economics