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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

Forget the Homeownership Rate, It Is the Process That Matters

(0) Comments | Posted December 16, 2014 | 10:34 PM

Because of the widespread belief that homeownership is valuable, the recent decline in the homeownership rate has generated some dismay. The rate, which had peaked at 69.1 percent in 2005, shortly before the financial crisis, has since fallen to 64.8 percent. This is the lowest it has been since 1995.

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To Avoid Outliving Your Money, Take a HECM Reverse Mortgage Before Interest Rates Rise

(1) Comments | Posted December 12, 2014 | 3:16 PM

Many seniors in retirement are concerned that they may outlive their financial assets. If they have equity in their homes, however, they can reduce or eliminate this worry. They can use the HECM reverse mortgage program to generate an income stream that becomes larger the longer they live. It is...

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Can Bad Financial Habits Be Unlearned?

(0) Comments | Posted December 9, 2014 | 11:51 PM

Some readers of last week's column recognized themselves in my description of a "NOHO": someone not cut out to be a homeowner. NOHOs live paycheck to paycheck, price substantial purchases in terms of the monthly financing charge, and typically have no reserve for meeting unexpected contingencies. Some readers asked me...

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Homeownership Is Not For Everyone

(0) Comments | Posted December 9, 2014 | 11:41 PM

Some people are not cut out to be homeowners. I call them NOHOs. What distinguishes them is not their income, their mobility, or where they live -- rather, it is how they live.

While homeowners live with at least one foot in the future, and have learned how to...

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Introducing the Manageable Mortgage

(0) Comments | Posted November 16, 2014 | 2:25 PM

Last week I suggested that the standard mortgage was very difficult for many borrowers to manage because of its rigid payment obligation, the fixed payment period and payment amount, and the high cost of building a payment reserve. This article introduces what I will call the Manageable Mortgage which has...

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Why the Standard Mortgage Is Obsolete

(0) Comments | Posted November 11, 2014 | 11:43 PM

Last week I wrote about the so-called wealth-builder (WB) mortgage, designed to marry the rapid balance pay-down of a 15-year mortgage with the low monthly payment of a 30. I concluded that without the lender or government providing a subsidy, WB doesn't work.

That doesn't mean that our existing...

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Is the Wealth-Builder Mortgage All Smoke and Mirrors?

(1) Comments | Posted November 5, 2014 | 6:08 PM

"What do you think of the new Wealth-Builder mortgage that has gotten a lot of press?"

The developers of the Wealth-Builder (WB), Edward Pinto and Stephen Oliner of the American Enterprise Institute view the 30-year mortgage that today dominates the market as badly flawed. Their view is that it takes...

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Why Many Good Mortgage Loans Are Not Being Made

(4) Comments | Posted October 25, 2014 | 11:44 PM

The housing sector today is not providing the economic stimulus we had come to expect during periods of economic recovery. A major reason is that the underwriting rules and practices that determine whether or not an applicant qualifies for a home mortgage are much stricter today than they were before...

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Introducing the Kosher HECM Reverse Mortgage

(0) Comments | Posted October 19, 2014 | 9:16 PM

The kosher stamp on a food means that it has been certified as fit for human consumption. We need a comparable certification process for financial instruments sold to consumers, with the need most pronounced for the more complex instruments.

When scaled by the need for certification, HECM reverse mortgages...

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Why and How to Eliminate Mortgage Charges by Third Parties

(2) Comments | Posted October 13, 2014 | 11:27 PM

In a recent article I proposed that Fannie Mae and Freddie Mac be removed from limbo and given a new mission: to create a better primary mortgage market. Among other things, this would include the elimination of third-party settlement costs. To borrowers, these are a horrible yet unnecessary source of...

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Why Not Use Fannie and Freddie to Make a Better Primary Market, Instead of Scrapping Them?

(0) Comments | Posted October 9, 2014 | 10:10 PM

The phase-out of Fannie Mae and Freddie Mac, which have now been in conservatorship for 6 years, is on indefinite hold. Terminating them without an effective replacement would devastate the market, and no effective replacement is in sight. The one proposed by the Senate Banking Committee, which I looked at...

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Conventional Versus FHA: Which Should You Choose?

(0) Comments | Posted October 4, 2014 | 3:25 PM

It is not an academic question. My calculations show that the wrong choice can cost a borrower as much as $33,000 over 15 years on a $200,000 loan, and as much as $66,000 on a $400,000 loan. Don't jump to the conclusion that the better choice is the mortgage with...

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The CFPB Is Now a Consumer Complaint Clearinghouse: Will That Help Consumers?

(1) Comments | Posted September 8, 2014 | 11:59 PM

Markets for financial services often don't work well for consumers. The trial and error technique that consumers rely on in navigating many markets, such as food and clothing markets, does not work well when transactions are large and infrequent. Financial firms that expect to see a customer only once may...

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Don't Expect Much From Unregulated Regulators

(0) Comments | Posted August 29, 2014 | 4:09 PM

The seeds of this article were planted in my brain some 30-odd years ago, when I did a consulting project for HUD, for which they contracted to pay me $2,500. Three months after delivery and acceptance of my report by HUD, I realized I had not yet been paid and...

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Is a Crisis Brewing in the Market For Sub-prime Loans on Used Cars?

(0) Comments | Posted August 12, 2014 | 5:49 PM

In a long front-page article in the NY Times last month, Jessica Silver-Greenberg and Michael Corkery answer this question affirmatively. Their article cites numerous parallels to the conditions that led up to the crisis in the sub-prime mortgage market in 2007-08. The similarities include:

  • A surge in...
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Shoud Seniors Buying a House Do It With a Reverse Mortgage?

(0) Comments | Posted August 5, 2014 | 10:48 PM

Many home purchasers are seniors. Some become homeowners for the first time, but most have been and want to remain homeowners. They just don't want to remain in their current house. They may want a house that has no stairs, or one that is closer to family or friends or...

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Investing In a Larger Down Payment: High Yields and No Risk

(1) Comments | Posted July 30, 2014 | 2:44 PM

Consumers looking to purchase a home within the near future face many decisions, including how large a down payment to make. The down payment is the sale price (confirmed by a appraisal) less the loan amount. In most cases, home purchasers must have financial assets at least as large as...

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Will Lenders Pay Borrowers to Take a Mortgage Loan?

(0) Comments | Posted July 25, 2014 | 6:48 PM

Yes, mortgage lenders in the US will pay rebates to borrowers. This is a potentially valuable option which, to my knowledge, is not offered anywhere else in the world. But having options means having to make choices, and this is a difficult one that borrowers often get wrong.


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A New Challenge to the HECM Reverse Mortgage Program

(2) Comments | Posted July 22, 2014 | 11:40 PM

The United States today faces a retirement funds crisis: a rapidly growing number of persons who are retiring without the financial capacity to support themselves during ever-increasing life spans. The HECM reverse mortgage program, which allows older homeowners to convert some or all of the equity in their homes into...

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Delay Taking Social Security If You Can Manage It

(0) Comments | Posted July 11, 2014 | 12:27 AM

For most seniors, waiting until age 70 before collecting social security, as opposed to taking a smaller amount earlier, is an excellent investment. A typical senior who could draw $1350 a month at age 62, would see the draw increase to $2376 at age 70. Yet more than 2 of...

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