Smart Mortgages, Privacy and the Regulatory Possibility of Infomediation

Abstract

This Article argues for a new regulatory approach that could both increase market efficiency and protect informational privacy in the modern information economy. It explores that approach - information intermediation, or infomediation - in the context of the current debates about re-engineering the mortgage markets in the wake of the 2008 financial crisis. In particular, the Article is the first scholarly work to introduce the concept of “smart mortgages” - loans and mortgage securities with more rich and dynamically updated information than traditional mortgage products. The Article considers recent regulatory and industry momentum behind smart mortgages and contrasts the market efficiencies created by such proposals against the individual and social privacy harms a smart mortgage system would inflict. It argues that policy makers should consider information intermediation as a regulatory option to capture the efficiency gains of smart mortgages while preserving individual informational privacy, and considers the implications of infomediation beyond the mortgage context for other similar debates about the future of privacy in an information-rich economy. In particular, the Article concludes by comparing the smart mortgage and healthcare reform debates and showing the possible role of infomediation in each. In sum, the author argues that smart mortgages done properly could be a foundational step forwards as an example of regulatory sophistication.

Keywords: mortgage reform, mortgage backed securities, privacy, smart mortgages, Project RESTART, infomediation, trust law, commercial trustees, information trustees, healthcare reform

JEL Classification: G18, G20, G21, G23, G28