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You’ve got some explaining to do…

October 1, 2006

With nontraditional mortgage such as Option Adjustable Mortgages and Interest Only Mortgages becoming more common, bank have been told by federal regulators to fully explain the inherent risks to borrowers.  These nontraditional loans are now making up as much as 30% of all loans made and regulators have become increasingly concerned that borrowers are not fully aware of the effect of rising interest rates on their payments.  Of further concern is the fact that delinquencies and forclosure rates have been on the rise.  However, the Mortgage Bankers Association has stated that delinquencies and forclosure are well within historical norms.  Federal regulators have put banks on notice that in future audits they will consider weather loans have be made in accordance with prudent lending practices and with concern of the borrower’s ability to repay.

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