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Jack M. Guttentag
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Jack M. Guttentag is Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania. He served as chief of the Domestic Research Division of the Federal Reserve Bank of New York; was a member of the senior staff of the National Bureau of Economic Research; and was managing editor of both The Journal of Finance and The Housing Finance Review. Prof. Guttentag has been advising consumers and the media on mortgage-related issues since assuming emeritus status in 1997. Comments and questions can be left at

Entries by Jack M. Guttentag

Choosing the Best Type of Mortgage

(1) Comments | Posted September 1, 2015 | 9:08 AM

Mortgage borrowers having to choose between the different types of mortgages face a puzzle, which may be particularly perplexing today. Interest rates remain low by historical standards, the spread between fixed and adjustable rates remains large, but expectations are widespread that all rates will soon increase - unless the current...

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Are HECM Reverse Mortgages Overpriced?

(0) Comments | Posted August 30, 2015 | 1:09 PM

HECM reverse mortgages are reputed to carry high upfront fees, which raises two questions addressed here. First, are seniors getting real value in exchange for the high fees? The answer in most cases is "no". Second, can a senior who knows the ropes avoid paying excessive fees? The answer in...

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Is This a Good Time for a New HELOC?

(0) Comments | Posted August 20, 2015 | 9:07 PM

"Recently you pointed out a slew of problems now faced by borrowers who took out HELOCs before the financial crisis. Their timing was terrible, but that's water over the dam. Are conditions more favorable to borrowers taking out HELOCs now?"

In some respects, conditions are more favorable now for HELOC...

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Mortgage Closing Date: Does It Matter?

(0) Comments | Posted August 18, 2015 | 6:27 PM

On a purchase transaction, there is no financial advantage in closing on any day of the month, as compared to any other day. On a refinance, however, it is a good idea not to close on a Friday.

Closing Date and Per Diem Interest

The interest clock on a...

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Is Paying Down Your Mortgage Balance a Good Investment?

(0) Comments | Posted August 17, 2015 | 8:31 PM

"We are allocating $600 a month to savings... should we pay down our 4% mortgage or put the savings into our retirement account?"

In principle, you place it where it will earn the highest after-tax and risk-adjusted return. If you itemize your tax deductions and are in the 25%...

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The Tontine: A 17th Century Solution to a 21st Century Problem

(1) Comments | Posted July 25, 2015 | 11:15 AM

The tontine is an investment scheme where each of a group of participants pays a specified sum into a fund and receives a pro rata share of the income generated by the fund, but when a participant dies their share is divided among those remaining. As the number of participants...

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A New Approach to Protecting Consumers In Financial Markets

(0) Comments | Posted July 20, 2015 | 1:10 PM

Markets don't work well when one party in a transaction knows much more than the other, and nowhere is the knowledge gap wider than in HECM reverse mortgages. Borrowers typically know very little because reverse mortgages work differently and are much more complicated than the mortgages with which they purchased...

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What Happens When the Lender Miscalculates the Payment?

(1) Comments | Posted July 13, 2015 | 8:49 PM

With millions of mortgage loans originated every year, it is not surprising that now and then lenders make a mistake in calculating the monthly mortgage payment. On a fixed-rate mortgage, the payment is calculated only once, when the loan is originated, so any such mistake occurs then. On an adjustable...

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Website Features Home Buyers Should Look For

(0) Comments | Posted July 8, 2015 | 11:01 PM

Home buyers who need a purchase mortgage are less likely to use the internet to find one than are existing owners looking to refinance, yet the benefits of online shopping are just as large if not larger for home buyers. The problem may be that home buyers expend so much...

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How to Pay Off Your Mortgage Balance Faster Without Being Scammed

(0) Comments | Posted July 6, 2015 | 10:29 AM

The 30-year fixed-rate mortgage is a great instrument that has made homeownership possible for millions of consumers, but none of them like the idea of being in debt for 30 years. Those who like it the least and have the poorest understanding of how mortgage amortization works are vulnerable to...

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Protecting Borrowers in Dysfunctional Markets: A Major Challenge to CFPB

(2) Comments | Posted June 25, 2015 | 10:58 AM

Dodd/Frank established the Consumer Financial Protection Bureau (CFPB) after the financial crisis to protect consumers in financial markets, but it does not tell the agency how to do it. The need for such protection varies from market to market, depending on the extent to which consumers can obtain the information...

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The Pre-Crisis HELOC Chickens Are Coming Home to Roost

(0) Comments | Posted June 19, 2015 | 8:11 PM

"Ten years ago we purchased a house for $310,000 which we financed with a first mortgage for $255,000 at 3.75 percent, and a HELOC for $65,000 at 3.5 percent. The HELOC amount was at the maximum right from the start, which has ruined our credit, and very soon our payment...

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Reflections on Mandatory Counseling

(0) Comments | Posted June 13, 2015 | 1:55 PM

Economists who extoll the virtues of free markets concede that markets don't work well under conditions of "information asymmetry" -- when one party to transactions, who knows a lot more than the other party, specifies the contractual terms of the transaction. Unfortunately, information asymmetry characterizes some very important markets, including...

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Is Another Housing Price Bubble Looming?

(1) Comments | Posted June 8, 2015 | 9:20 PM

The question is being asked with increasing frequency, and also with great anxiety. The last housing bubble led to a financial crisis followed by a recession.

Many of those commenting on the question, however, don't understand what a price bubble is. It is NOT a marked rise in prices. Sharp...

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Senior Homeowners Can Reduce the Risk of Outliving Their Money

(0) Comments | Posted May 27, 2015 | 2:06 PM

Seniors who, during their work years, accumulate a nest egg that they then use to maintain their lifestyle during retirement risk running out of money if they live too long. With life spans growing at an increasing rate, that quandary is increasingly being labelled a "retirement funds crisis." Seniors who...

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Why Small Home Mortgage Loans Are Hard to Find

(0) Comments | Posted May 18, 2015 | 8:07 PM

Providing small mortgage loans at non-subsidized prices affordable to the borrower has always been a challenge. The core problem is that the high cost of originating and servicing a mortgage loan is no smaller for a small loan than for a large one, but the dollar amounts of interest and...

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5 Questions to Ask Your Lender Before Locking a Rate

(0) Comments | Posted May 5, 2015 | 7:54 PM

You have identified the mortgage lender with whom you wish to work, based at least in part on a price quote. You probably know that the price quote doesn't mean anything until it is locked, but few borrowers know all the steps required to get to the lock, and the...

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Reverse Mortgage Prices and Closing Costs: A Look at the Options

(0) Comments | Posted April 25, 2015 | 1:21 PM

Senior homeowners looking to shop the HECM reverse mortgage market for the best price, meaning the lowest interest rate and origination fee, have a major problem. Unlike the standard mortgage market where price data are available from many sources (including third party multi-lender sites), in the reverse mortgage market prices...

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Mortgage Qualification Rules Are Not Always Black and White

(0) Comments | Posted April 23, 2015 | 12:19 PM

Some of the more interesting questions I receive from readers are about unusual situations that may affect their ability to qualify for a mortgage. The rules are not always crystal clear, which is why lenders continue to rely on underwriters whose stock in trade is good judgment. Here are a...

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Mortgage Referral Fees and the Public Interest: 40 Years of Bungles

(1) Comments | Posted April 8, 2015 | 4:07 PM

Markets don't work well when one party to transactions has much more information than the other party, especially when the party with better information also controls the process. The two best illustrations of this rule are the markets for medical services and home mortgages.

In principle, Government regulation can...

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