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Lenders Defend Risk Management on 'Exotic' Loans.
Washington -- Federal banking regulators need to calm down and rethink their "unwarranted" and "excessive" underwriting restrictions on interest-only and payment-option mortgages, according to industry comment letters.
Remarks filed by the Mortgage Bankers Association, American Bankers Association, Consumer Mortgage Coalition and America's Community Bankers stress that regulators are overreacting to negative amortization and payment shock associated with these nonprime mortgages.
"Nontraditional mortgage products should not be singled out as necessarily riskier than other products. They simply present different kinds of risk," writes CMC executive director Anne Canfield in her comment letter.
Lenders have been originating and managing the risks of these ARM products since the 1980s. However, the proposed guidance "pays little heed to that experience," says the American Bankers Association.
IO mortgages and payment-option ARMs have been two of the hottest products in the mortgage industry the past two years.
According to figures compiled by Mortgage Servicing News, IOs now ...
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Source: HighBeam Research, Lenders Defend Risk Management on 'Exotic' Loans.