Home Loans
Government Agencies Warn Banks of Exotic Mortgages
(presented by www.refinance-refinance.net - mortgage lenders)
By Martin Lukac
A message from multiple government agencies was released on Friday, warning banks to make mortgage loans to borrowers that they can pay back. The message continued to say that lenders should make sure that exotic loan borrowers know how high their monthly payments could become.
Millions of homeowners have found that their creative ways to stretch into a home have left them with mortgage payments too high to pay. Most of these lenders have nontraditional mortgage products, including interest-only and optional payment ARMs.
“We saw the potential for problems occurring,” said John Dugan, comptroller of the currency. “There have been some very abusive problems.” He continued to say that the Treasury Department doesn’t have jurisdiction over the issue.
That is part of the problem, there is no one agency responsible for the policing of new mortgage products.
In fact, the popularity of these mortgages has risen greatly in the subprime market, which is largely outside of the federal regulators’ jurisdiction.
Around 33% of the mortgages sold last year were packaged to minimize the initial monthly payment to make it seem as if the borrower could afford a more expensive home. Later, the monthly payment will reset to a higher interest rate and include the deferred interest charges and any extra principal. This is when the borrower finds himself in trouble.
Banking industry officials defend exotic mortgages as a way to allow more consumers the chance at homeownership, even with increasing home prices in many areas.
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Martin Lukac represents http://www.RateEmpire.com, an Internet consumer banking marketplace. RateEmpire.com is a destination site of personal finance, investing, taxes and mortgage rates. RateEmpire.com provides mortgage guides and financial rates and information. RateEmpire.com also operates a financial portal #1 Ame! |
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