Simplifying Complex Disclosures: Evidence from Disclosure Regulation in the Mortgage Markets

• 成果类型: Article
• 署名作者: Kielty, Patrick D.; Wang, K. Philip; Weng, Diana L.
• 署名单位: University System of Ohio; Ohio State University; State University System of Florida; University of Florida; City University of New York (CUNY) System; Baruch College (CUNY)
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2021-0269
• 发表日期: 2023
• 页码: 191-216
• 关键词: economic consequences; financial literacy; CONSUMER CONFUSION; earnings; INFORMATION; investors; FAILURE; FinTech; RACE

摘要

Complex disclosures have long been a major source of borrowers' poor understanding of mortgages. We examine the effect of simplifying mortgage disclosures in a difference-in-differences design around a significant disclosure rule mandated by the Consumer Financial Protection Bureau in 2015. We find that inexperienced borrowers (first-time home buyers) pay significantly lower interest rates after the disclosure regulation than experienced borrowers (repeat buyers), suggesting that simplifying these disclosures reduces mortgage interest costs. Additional tests show that the reduction in interest costs is not accompanied with more upfront noninterest costs paid by borrowers. Our cross-sectional analyses reveal two mechanisms through which simplifying disclosures lowers interest costs: curbing predatory lending and facilitating borrower shopping. We further find that disadvantaged borrowers (Black, Hispanic, and single female) benefit more from simplified disclosures. Last, we do not find that simplifying disclosures affects mortgage loan performance. JEL Classifications: G21; G5; G18; M4.