imperfect information
[In the econ textbooks, both borrowers and lenders are well, and
equally informed…]
Study: One-Third of Homeowners Don’t Know Loan Type
SmartPros Accounting (03/27/07)
Based on a survey conducted by BankRate Inc., an estimated 34 percent
of homeowners are uncertain what kind of mortgage they carry. The
findings also showed that 28 percent of poll respondents fret about
how they will manage to make future loan payments, and 36 percent of
those holding adjustable-rate mortgages do not know what action they
will take once their interest re-sets. “Clearly, many homeowners are
uninformed about their mortgages,” says Bankrate.com senior financial
analyst Greg McBride. More than half of the homeowners surveyed–57
percent–have fixed-rate financing, and 38 percent of those polled
say they would shy away from ARM products when purchasing a home in
the future.