Forbidden Fruit

Eve was the first person to think that forbidden fruit might taste a lot better than the options on the PERMITTED list. And look what happened!

Human nature seems to dictate that we take delight in things that are naughty. Who didn’t want to go into the nearby orchard and pick a few apples even though there were some at home in the kitchen? We all did such things as kids, and most of us seem to have survived the perils
posed by those temptations. Does this give us a message that it’s OK? Perhaps so, because there certainly is evidence that this kind of behavior stays with us into adulthood.

A recent study reported in the Journal of Marketing demonstrates this human propensity for making conscious decisions that adversely affect our well-being. In one study, people were told about “good fat” and how “bad fat” clogs arteries. In the test, the subjects rated higher the taste of the one they were told was unhealthy.  In another taste test of an unfamiliar drink, the ones who were told that it wasn’t very healthy rated the taste higher than those who thought the drink was a healthy product.

That means that peoples’ perception of the taste was influenced by their intuitive feelings about the food, not the actual taste.  I’d be the first one to agree that there are foods loaded with fat, calories, and cholesterol that aren’t healthy all, but they sure taste great. I also have tried some strange foods my wife brought home from the Health Food Store that I thought were unappealing, to put it lightly. But I wasn’t aware of this bias, and I may have it too. 

I wonder about people gorging themselves on unhealthy foods at a fast food joint. I wonder why they are doing something that, for many of them, is inherently dangerous. They must have seen the warnings but those are just not strong enough to overcome the accumulated strength of behavioral habit and this unhealthy intuition to crave what is bad.

What does this have to do with mortgages? Well, I am often astonished at the large number of people who select stupid loans, ones that carry unnecessary risk.  We have been warning homebuyers of Option ARMs for several years now, yet they continue to be very popular.  Maybe it’s like warning people about the unhealthy food.

In this case, of course, you don’t have people in a rational processing environment where an unbiased expert is helping them; you have a highly trained salesman who is pushing his “feel good” loan.  Sadly, the guy who urges caution and who takes customers’ interests at heart isn’t going to be called in for a second opinion.

For a long while, I thought that some people just enjoyed living close to the edge. I also thought that maybe it’s because they see so many other people choosing the same type of loan and they think it’s good for them too. There is no doubt that popularity has a strange allure. I’ve never understood that. And now we hear about this research that suggests this inborn intuition may have more control over their decision-making process than people would ever acknowledge.

With this research in mind, I think that it is easier to understand why people act as they do.  The fact is that most of us are not always aware of our own emotional biases. But there are marketing types who DO understand these biases; that’s how they make a living. They are the people who put together the sales pitches to sell calorie-laden soft drinks, fat-laden French fries, and, you guessed it, Option ARM loans. And I can assure you that those sales pitches work.

When you get a mortgage, you need to avoid getting into that kind of situation. It is really helpful to understand that you may be vulnerable to a sales pitch that is based upon the assumption that you are likely to be tempted.

d and convinced into eating some forbidden fruit. That can get you into a loan that is contrary to your best interests.