Mortgage Contracts: Law, Economics and Psychology

Mortgage Contracts: Law, Economics and Psychology

Fecha: julio 2019

Oren Bar-Gill

Fallos de mercado, Crédito hipotecario, Subprime, Comportamiento del consumidor

Law and economics. A productive relationship

Mortgage contracts, like other consumer contracts, are the product of an interaction between market forces and consumer psychology. Imperfectly informed and imperfectly rational borrowers fail to fully comprehend the costs and benefits of the mortgage contract. Moreover, sophisticated lenders design their contracts in response to consumer misperception. The resulting behavioral market failure hurts consumers and reduces efficiency. This Chapter uses the US mortgage market and, specifically, the subprime mortgage market before the financial crisis to illustrate the causes and effects of this behavioral market failure. Different legal policy responses are also considered.

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