Industry News

‘Exotic’ real estate loans examined

Nontraditional loan borrowers less wealthy with weaker credit, report finds

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While the use of so-called "exotic" or "nontraditional" mortgage loan products has soared during the housing boom, new research suggests that middle and moderate income borrowers with less-than-stellar credit scores are carrying the brunt of these riskier loans. An analysis from the Consumer Federation of America found that African American and Latinos were more likely to receive payment-option mortgages than whites and African Americans were more likely to receive interest-only mortgages. The new research findings appear in the group's newly released study, "Exotic or Toxic? An Examination of the Non-Traditional Mortgage Market for Consumers and Lenders." The report, which analyzed certain borrower and loan characteristics of more than 100,000 mortgages originated between January and October 2005, examines the implications of the rapid rise of non-traditional mortgages and how these products pose additional risks for borrowers. Nontraditional mortgage loans such as interest-only and...