April 7, 2006

OTS Warning

OTS Director Sounds Off on Exotic Mortgages
Fri, 07 Apr 2006 
     
The director of the Office of Thrift Supervision raised a red flag yesterday, warning lenders not to relax their credit underwriting standards in the face of waning originations. John Reich also voiced concerns regarding the proliferation of “exotic” mortgage products, which offer borrowers reduced payments for extended periods of time. Regulators are “closely monitoring” these kinds of loans, such as interest-only and option-adjustable-rate mortgages, to make sure that consumers fully understand the risks associated with them. The regulators are also pressing lenders to only originate loans that borrowers can repay. Formal guidance from federal banking regulators related to these new loan products is expected within the next few months.
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