Barbara Kiviat, at The Curious Capitalist, suggests using Nudge’s RECAP (Record, Evaluate, and Compare Alternative Prices) idea as a way to help customers understand complex mortgage agreements. RECAP would not allow the government to set the price for service charges; it would only require their disclosure. It’s goal is to increase information availability and awareness among consumers.
For mortgages, lenders would be required to provide a spreadsheet, too. It would break down the cost of a mortgage into two categories—fees and interest—and it would also, importantly, provide a digital interface for third party vendors to come along and sell comparison services. Similar to what Morningstar does for mutual funds. With downloadable data, third parties could create systems to flex the assumptions behind a mortgage (how much interest rates will go up; the year you go to sell your house), and then help you make a better decision about which sort of loan to pick. There could also be some sort of worst-case scenario feature. That would have been handy.