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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

Introducing the Kosher HECM Reverse Mortgage

(0) Comments | Posted October 19, 2014 | 8:16 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 | 10:27 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 | 9:10 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 | 2:25 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 | 10:59 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 | 3:09 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 | 4:49 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 | 9:48 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 | 1:44 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 | 5:48 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 | 10:40 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 10, 2014 | 11:27 PM

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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Two Unorthodox Ways to Pay Off a Mortgage Early

(0) Comments | Posted July 3, 2014 | 12:39 PM

Some schemes for paying off a mortgage early, such as biweeklies and bimonthlies, are offered by lenders while others are entirely within the control of the borrower. This article is about two schemes of the second type that keep popping up in my mailbox. Scheme 1 is all smoke and...

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Do Home Buyers Need a Pre-Approval?

(0) Comments | Posted June 21, 2014 | 5:19 PM

With bargaining power shifting from home buyers to sellers in an increasing number of local markets, buyers in competition with other buyers are looking for any edge they can get. One possible edge is a pre-approval letter (henceforth PAL) from a lender.

Pre-Approval Defined: A PAL is a statement...

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Should More Consumers Be Selecting Adjustable Rate Mortgages (ARMs) Today?

(1) Comments | Posted June 13, 2014 | 10:23 PM

The Mortgage Bankers Association reports that only about one of every ten home mortgages being written today carries an adjustable interest rate. A combination of negative press on ARMs and a widespread belief that interest rates are bound to start rising in the near future has induced extreme caution among...

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Should My Spouse and I Apply for a Mortgage Jointly, or Should I Apply on My Own?

(4) Comments | Posted June 8, 2014 | 8:30 PM

"My wife and I are looking to purchase a $450,000 home, and I am wondering whether I should apply for the mortgage we will need as an individual, or jointly with my wife? I make $84,000 a year and have a credit score of about 800. She makes $48,000 and...

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When to Ignore the APR and When to Use It

(0) Comments | Posted June 3, 2014 | 5:17 PM

For over 40 years, the centerpiece mortgage disclosure mandated by Truth in Lending (TIL) has been the Annual Percentage Rate or APR. Recently, administration of TIL has shifted from the Federal Reserve to the new Consumer Financial Protection Bureau (CFPB), which has developed a new disclosure form called the Loan...

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Are You Ready For the Mortgage Closing?

(0) Comments | Posted May 19, 2014 | 3:40 PM

"I recently read that the Consumer Financial Protection Bureau is going to make the mortgage loan closing process more consumer friendly. Do you think it can?"

I read the statement by the CFPB director, who correctly identified the closing problem: too many documents many of which are badly-designed, insufficient time...

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Do You Have a Simple Interest Mortgage?

(0) Comments | Posted May 2, 2014 | 11:37 AM

"I recently discovered that the second mortgage I have had for 9 years was simple interest, which explains why I have made barely a dent in paying down the balance...The payment due date is the 11th of each month but the lender arranged for automatic payment on the 25th, without...

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When to Reject a HECM Reverse Mortgage, and When to Consider One

(0) Comments | Posted April 21, 2014 | 10:34 PM

Some seniors don't qualify for a reverse mortgage, either because they are not old enough (you must be at least 62), or because the difference between the value of their home and the balance of the existing standard mortgage on the home (their "home equity") is too small. Such seniors...

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