Hybrid adjustable-rate mortgages like the 2-28, which carries a fixed "teaser" interest rate for two years and then fluctuates with market interest rates, should be subject to the same underwriting and disclosure requirements as so-called "exotic" mortgages, a group of influential U.S. senators says. The Mortgage Bankers Association is fighting the proposal, saying it would reduce the number of borrowers able to finance homes and contribute to downward pressure on home prices. Federal banking regulators issued new guidance in September that applies to mortgage lenders offering payment-option ARM and interest-only loans. The guidance requires federally chartered banks that offer such nontraditional or exotic loans to disclose the risk of payment shock, and assess a borrower's ability to repay a loan at the fully indexed rate. Since that time, 23 states have adopted their own version of the federal guidance, subjecting all mortgage lenders to the same rules. Six members of the Senat...
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