Mortgage consumers often don't know what kind of loan they need.

They are easily swayed into signing for loans they don't understand.

And they wind up unable to pay for the mortgage mistakes they make.

The latest in a flurry of spring reports to point the finger at segments of the disjointed mortgage industry for housing market woes, says consumers taking it on the chin are the real victims.

"The situation facing consumers is made even more difficult by the widespread use of targeted incentives that encourage some mortgage brokers and loan officers to aggressively market confusing, and often more costly, subprime products to less than knowledgeable and often desperate borrowers, says Nicolas P. Retsinas, director of Harvard University's Joint Center for Housing.

Funded by a Ford Foundation grant, the center produced two landmark reports, one discussing mortgage consumers' habits ("Understanding Mortgage Market Behavior: Creating Good Mortgage Options for all Americans"), the other, at times, a scathing review of mortgage industry practices ("Mortgage Market Channels And Fair Lending: An Analysis Of HMDA Data").

The studies say the mortgage industry has grown quickly over the past 20 years with an array of new loan products -- especially subprime loans -- designed to reach previously underserved consumers.

But the positive benefits of the loans are being erased by a rise in foreclosures often concentrated in low-income and minority neighborhoods with a concentration of the riskiest home loans.

The reports also say there are fair lending issues regarding pushing certain loans in minority communities. That trend is magnified by a rise in subprime mortgage lending linked to the rise of new and typically less-regulated world of subprime mortgage specialists, mortgage brokers, and a secondary market buying securities backed by higher-risk mortgages.

It's a recipe for financial disaster.

Portions of the studies echo Center For Responsible Lending research and testimony presented to the U.S. House Committee on Financial Services; National Foundation for Credit Counseling's "2007 Financial Literacy Survey Results and Summary Report"; and several additional recent studies.

Harvard's key findings about consumer behavior in "Understanding Mortgage Market Behavior" include:

• Consumers are confused about mortgages and the uninformed choices they make cost them their homes. Even the most sophisticated borrowers find it difficult to shop effectively in the complex mortgage market. Their confusion allows them to be easily swayed into signing for loans they can't afford.

• Consumers often struggle with the complexity of mortgage pricing, loan features, future changes in mortgage payments and other elements inherent to nontraditional loans.

• Consumers are vulnerable to "push marketing," as mortgage professionals prey upon their vulnerability to sell products that are not in their best interest.

• The mortgage industry's targeted incentives encourage mortgage brokers and loan officers to sell higher-priced mortgage products, further stimulating aggressive "push marketing" efforts.

• Loan products designed to help borrowers overcome affordability barriers are too often inappropriately marketed to low-income and low-wealth individuals who end up with worsened economic circumstances.

In a related event, the Center For Responsible Lending's recent testimony on Capital Hill included comments about subprime loans being responsible for draining the levels of home ownership, rather than improving it by helping previously underserved consumers achieve home ownership.

"Homeownership has been thwarted rather than supported," said Mike Calhoun, CRL president. "There's a difference between increasing access to home loans and expanding home ownership."

In its "Mortgage Market Channels And Fair Lending," look at the mortgage industry, Harvard found:

• Higher-priced loans (including subprime loans) flow primarily through new mortgage market channels that are less closely monitored or regulated by federal agencies.

• Likewise, secondary market outlets for higher-priced loans are less regulated. Fannie Mae and Freddie Mac in 2004 purchased only 1.7 percent of the nearly 1.3 million higher-priced loans.

• There's also less regulation on loans that go to racial and ethnic groups.

White borrowers are 50 percent more likely (28.5 percent versus 17.4 percent) than black borrowers to obtain a loan from a federally regulated entity operating in their assessment area. In contrast some 44.2 percent of all blacks (versus 30.1 percent of whites) obtain a loan from a less heavily regulated independent mortgage companies.

The report suggests new initiatives to help consumers overcome aggressive marketing tactics and some regulatory overhaul for the mortgage industry.

The recommendations include:

• The mortgage industry and consumer advocacy groups should establish a trusted advisors network -- a third party system, including a sort of "buyer's broker" for mortgages who works for a flat fee and is legally required to represent the buyer's best interests.

• Along with the network, a second-opinion hotline, should be established by an organization like NeighborWorks America to help consumers navigate the mortgage morass and assess the risks associated with mortgages.

• Additionally, a web-based pricing guide could assist advisors understand and explain the costs and benefits of specific mortgage options.

• Homebuyer counseling organizations should use incentives, including pre-approval -- provided consumers attend counseling for a specific product -- to keep consumers focused on good loans.

• Change regulations to enhance consumer shopping. Give consumers more time to shop by providing Truth In Lending Act disclosures three to seven days prior to closing. Extend "right of rescission" periods. Require "high risk" borrowers to seek a second opinion. Make Good Faith Estimates (GFE) firm earlier in the lending process.

• Develop industry "best practices" that help sanction or force out participants unwilling to adhere.

• Extend recently released federal guidance for originating nontraditional loans to all mortgage lenders including non-bank, independent mortgage companies.

• Extend Community Reinvestment Act (CRA) reviews to all lenders where ever they originate loans.

• Encourage CRA-regulated entities to serve higher risk borrowers to expand market competition for higher-priced mortgages and bring them under the watchful eye of more comprehensive fair lending reviews.

• Legislate uniform federal regulations for mortgage brokers, who are now largely state regulated by a patchwork quilt of regulations that vary from state to state.

• Likewise, legislate more uniform oversight of secondary markets to give them more incentive to more carefully evaluate the loans that they purchase.

• Mandate a greater role played by Fannie Mae and Freddie Mac in subprime market to garner greater scrutiny over the higher risk mortgage market.