Regulators tighten guidelines for 'exotic' mortgages

New rules clamp down on underwriting, disclosure requirements

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Federal banking regulators today published new guidelines for banks to follow when originating and underwriting “nontraditional” or “exotic” mortgages that carry potential payment shock for borrowers.

Many in the loan industry cite these mortgages as major contributors to the nation’s home-ownership boom as they have enabled many borrowers to purchase in high-priced markets where traditional mortgages were out of reach.

The new guidelines retain disclosure and underwriting