Archives for financing



Why the CFPB’s Qualified Mortgage Rule Misses the Mark

This post grows out of two working papers (downloadable here and here) I’ve written with Joshua Mitts, a former student of mine who is now working at Sullivan & Cromwell.

Why the CFPB’s Qualified Mortgage Rule Misses the Mark
Ian Ayres & Joshua Mitts

Last Friday, the Consumer Financial Protection Bureau’s “qualified mortgage” rule went into effect.  This rule is designed to put an end to the risky lending practices that led to the financial crisis.  But a simpler rule could better assure borrowers’ ability to repay and simultaneously create greater repayment flexibility.

The purpose of the QM rule is to help assure that borrowers have sufficient monthly income to make their required mortgage payments, lessening the risk of large-scale defaults like those experienced after 2008. The rule creates a lender safe harbor for qualifying mortgages.  Lenders can still make non-qualifying loans, but must instead meet more onerous multi-factored underwriting standards. Qualifying loans reduce the risk that lenders will be held liable under Dodd-Frank for failing to make a “reasonable, good faith determination of a consumer’s ability to repay.”  Read More »



What Would Micropayments Do for Journalism? A Freakonomics Quorum

The notion of micropayments — a pay-per-click/download web model — is hardly a new one. But as a business model it hasn’t exactly caught fire, or even generated more than an occasional spark. Lately, however, the journalism community has become obsessed with the idea. This is what happens when an existing business model begins to […] Read More »



The Mole

Money magazine has a new columnist who simply goes by the name “The Mole.” I love the idea behind the column: an industry insider reveals the dirty secrets of financial planner misdeeds to the general public. I won’t blow his cover, but I know the guy who is writing it. He is smart and has […] Read More »



Another Look at “Sellers’ Concessions” in Real Estate

Our recent New York Times Magazine article on the use of cash-back transactions in home sales produced a mountain of e-mail responses. Among the most interesting was this one from New York attorney Nishani Naidoo, a former real estate lawyer and member of the New York State Bar Association’s Real Property group. He has been […] Read More »



Freakonomics in the Times Magazine: Payback Time

In their June 10, 2007, column for the New York Times Magazine, Dubner and Levitt present some interesting new research on real estate sales. No, it’s not what you’re thinking: more Realtor bashing! Although it is true that they have written before about the imperfect nature of the Realtor’s commission model, this column takes a somewhat different tack. It’s about a little-known trick known as a cash-back transaction, in which a buyer receives a “rebate” to finance his own down-payment – a rebate that the lending bank never finds out about. This blog post supplies additional research materials. Read More »



The FREAKest Links: Rotten Chicken and Personal Debt Edition

Repulsed by that six-inch centipede? Or are you simply being reminded of your own inevitable demise? A study led by Cathy Cox, a graduate student in the Department of Psychological Sciences at the University of Missouri-Columbia, determined that people find certain things disgusting because they make apparent our “vulnerability to death.” Food for thought next […] Read More »