Despite regulators’ warnings that some popular types of mortgages are risky, lenders are still making them, and mortgage insurance companies have begun pleading with federal banking agencies to act quickly to restrict them.

The loans under scrutiny include interest-only mortgages and "option" mortgages, in which borrowers decide each month how much to repay. Because monthly payments are lower than with traditional fixed-rate mortgages, borrowers can buy more expensive houses. In the past five years, millions of Americans have bought or refinanced homes using these loans. The risk comes because eventually these loans "reset," meaning the payment is adjusted upward — sometimes as much as doubling — to repay the full interest and principal owed.
   
Area Housing Outlook: 2006

The Post’s annual Housing Outlook provides in-depth analysis of area housing trends, with additional online-only features.


Washington Post

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