The National Association of Realtors trade group and the Center for Responsible Lending are trying to drive home a message of caution about some types of specialty mortgages in a new brochure titled, “Shopping for a Mortgage? Do Your Homework First,” a new brochure to inform home buyers about the risks and advantages of specialty mortgage products.

The publication is part of a new NAR consumer education campaign addressing specialty loans and abusive lending practices. The brochure helps consumers understand conventional loans such as fixed-rate and adjustable-rate mortgages, and more exotic loan programs such as interest-only mortgages, 40-year fixed-rate mortgages, negative-amortization mortgages, and option payment adjustable-rate mortgages.

The Center for Responsible Lending is a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices. CRL is affiliated with Self-Help, one of the nation’s largest community development financial institutions.

“The growth of the specialty mortgage market has helped many borrowers finance the American dream of home ownership, but these mortgages come with risks,” said NAR President Al Mansell of Salt Lake City. “Consumers are susceptible to loans with monthly payments that can spike dramatically, or that actually increase the amount they owe on their home. Home buyers should consult with a Realtor to learn about different financing options and their implications over time.”

Mike Calhoun, general counsel of the Center for Responsible Lending, said, “We’re warning home buyers to approach these new mortgages carefully. They should be cautious about accepting a mortgage they can’t afford. These mortgages can be devastating for families who are stretching their budget to buy a home.”

David Lereah, NAR’s chief economist, said, “Consumers particularly need to understand the risks inherent in specialty mortgages when financing a home purchase. The National Association of Realtors is committed to giving our Realtor members the tools and knowledge essential for their customers’ success.”

NAR is making the brochure available online to all of its roughly 1.2 million members at Buyers can ask their Realtors for a copy or can access the brochure at The brochure also is available through the Center for Responsible Lending at

“The State of the Nation’s Housing 2005,” a report issued by The Joint Center for Housing Studies of Harvard University, cites information from Loan Performance indicating that one in four home loans in 2004 was financed with an interest-only mortgage. Three years ago, these mortgages comprised a few percentage points of the total mortgage market.

In testimony before the U.S. House of Representatives Committee on Financial Services on July 20, Federal Reserve Board Chairman Alan Greenspan expressed concern about the “increase in the prevalence of interest-only loans and the introduction of more exotic forms of adjustable-rate mortgages.” He suggested that some home buyers may be using these loans to buy houses that they might not otherwise afford, and warned that lenders should “fully appreciate the risk that some households may have trouble meeting monthly payments as interest rates and the macroeconomic climate change.”

In May, NAR’s board of directors approved the launch of a new consumer education campaign through its membership to help consumers steer clear of predatory lending practices that can lead potential home buyers into credit problems and even foreclosure. The campaign aims to develop standards that balance the need to keep credit available for borrowers with less than perfect credit while avoiding abusive lending practices that put home buyers at unnecessary risk, the association reported.


Send tips or a Letter to the Editor to or call (510) 658-9252, ext. 137.

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