Document Type



In the aftermath of the financial crisis of 2008, low-income borrowers have been virtually shut out of the housing market. The spectacular failure of overzealous subprime lending at the beginning of the century is the culprit. Creditworthy borrowers exist in that underserved population, though regulation and the continued dominance of traditional banks in the mortgage market have conspired to deny those borrowers access to credit.

A market solution to this problem exists and is gaining momentum. Financial technology firms have begun to focus on the borrower experience and to create tools to help unsophisticated borrowers navigate complex financial products. This Article takes that trend a step further and anticipates market innovations that will broaden the population of eligible borrowers. These market innovations can overcome regulatory missteps to both enhance efficiency and provide meaningful protections to consumers that regulation has failed to deliver.

This Article makes several contributions to the literature. First, it shows how mortgage regulation has simply excluded the market participants it was intended to protect, thereby denying them the social and economic advantages of homeownership. Second, it shows how fintech has begun to work around those regulatory limitations to respond to the problems that led to the financial crisis by offering simpler products directly to consumers and providing more access to information. Third, it offers a market-based solution to the market and regulatory failures that anticipates the direction of fintech innovations. Finally, it argues that the thoughtful application of common law doctrines may be a more effective way to provide necessary consumer protections while allowing market forces to adapt to changing circumstances and emerging technology.