Economist argues that the standard mortgage is obsolete

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November 12, 2014

“The existing [mortgage] instrument was not designed to be managed,” writes Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania Jack M. Guttentag.
 
He argues that the current mortgage system has too rigid of a payment obligation and payment period. He also contends that the inability to reduce the payment on a fixed-rate mortgage through partial prepayment without having to refinance is counterproductive. “This is bad for lenders as well as borrowers,” Guttentag writes in the Huffington Post. “A borrower who gets behind and doesn’t have the means to catch up may be on a slippery slope to default.”
 
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