SSRN-Who Selected Adjustable-Rate Mortgages? Evidence from the 1989-2007 Surveys of Consumer Finances by John Beshears, Daniel Bergstresser

SSRN-Who Selected Adjustable-Rate Mortgages? Evidence from the 1989-2007 Surveys of Consumer Finances by John Beshears, Daniel Bergstresser: "Who Selected Adjustable-Rate Mortgages? Evidence from the 1989-2007 Surveys of Consumer Finances"

Interesting and important, but not all that surprising.

From the introduction:

"...a lack of financial sophistication may have made a subset of households more likely to take up of inappropriately risky mortgage products. In the 1992-2007 Surveys of Consumer Finances (SCF), interviewers rated both the ability of respondents to comprehend the financial questions in the survey and the degree to which respondents were suspicious of the interview....We find that in the 2004-2007 period, mortgage borrowers who exhibited lower comprehension and less suspicion in the SCF interview were more likely to have adjustable-rate mortgages (ARMs). The fact that these patterns are only present in 2004 and 2007 accords with the popular notion that the period immediately preceding the financial crisis witnessed an expansion of mortgage credit on terms that were not always fully understood by borrowers."