The Trump administration is drafting an executive order that would allow Americans to tap their 401(k) and 529 accounts to afford down payments on homes. It’s a positive move aimed at one of the defining frustrations of our time: the impossibility of homeownership for millions of working families and young people. But there is more the administration can do to help.
If we really want to help first-time buyers enter the housing market, we must also protect consumers from predatory housing lenders.
I’ve spent decades studying consumer decision-making, and I can tell you that the mortgage market is one of the most treacherous financial environments people navigate.
Most borrowers obtain only one mortgage quote before committing to the largest financial decision of their lives. Buyers who fail to comparison-shop often pay tens of thousands of dollars more over the life of their loan. Researchers have found that many homeowners significantly overpay for their loans, with less sophisticated borrowers especially likely to get a bad deal.
This is not news to the housing industry. And there’s no one worse than Zillow.
Zillow has publicly acknowledged that consumers rarely shop for mortgages and find the process confusing and intimidating. In theory, that insight could be used to help buyers compare options more effectively. In practice, it is increasingly used to keep them inside Zillow’s singular ecosystem, where the platform profits from the transaction at the borrower’s expense. And if the allegations in recent class-action lawsuits are to be believed, Zillow is intentionally deceiving consumers into signing up for its own more expensive mortgages.
Zillow is no longer just a home-listing website. It is now a vertically integrated platform that connects buyers to real estate agents and then strongly promotes its affiliated mortgage service. This is marketed as convenience. From a marketing ethics standpoint, it is something else: the exploitation of consumers. And when a platform knows that consumers are unlikely to comparison-shop and then positions itself as both a trusted guide and a mortgage provider, it crosses that line.
To help protect Americans’ savings, it is all the more important to make sure that they are not being illegally and unethically steered into higher-priced mortgages, further compounding the housing affordability crisis.
Regulators have long recognized the dangers of “steering” by financial service firms, from retirement accounts to credit cards. Mortgage finance deserves the same scrutiny. The administration should ensure that these new housing policies are accompanied by vigilant efforts to protect consumers.
Beyond enforcement, there is an urgent need to educate consumers about the risks they face. Many first-time buyers simply do not know that mortgage rates vary significantly across lenders, or that a platform recommending a mortgage may have a financial stake in that recommendation. Financial literacy programs and clear, prominent disclosures should be part of any comprehensive housing policy.
Homebuyers themselves must also be watchful. Any “easy” mortgage solution, especially one offered by a platform that profits from the transaction, should be treated with skepticism. Buyers should obtain multiple loan estimates, compare rates and fees carefully, and resist the pressure to prioritize convenience over cost.
The Trump administration deserves credit for taking housing affordability seriously. Opening new pathways to homeownership is a worthy goal. But if those pathways lead through a gauntlet of conflicted intermediaries, the buyers the policy is meant to help will end up paying for it, literally, for decades to come.
AMERICANS, NOT HEALTH INSURANCE COMPANIES, NEED RELIEF
Helping people buy homes is only half the job. Protecting them from being exploited in the process is the other half.
Jerry (Yoram) Wind is the Lauder Professor Emeritus and Professor of Marketing at the Wharton School of the University of Pennsylvania.
