Trade associations representing Realtors and lenders differ on new underwriting and disclosure guidelines for nontraditional mortgages.

The guidelines, issued last week by federal bank regulators (see story), require banks to use more restrictive standards in evaluating borrowers’ ability to repay interest-only and pay-option adjustable-rate mortgages, and to more fully disclose their costs.

The National Association of Realtors says it “strongly supports efforts to educate consumers” and that the guidelines will “ensure that lenders inform consumers about the risks related to nontraditional financing options.”

NAR “is very concerned that some borrowers are using nontraditional mortgages without fully understanding the risks involved,” said NAR President Thomas M. Stevens in a statement. NAR and the Center for Responsible Lending last year created an educational brochure, “Specialty Mortgages: What are the Risks and Advantages,” for Realtors to use in counseling clients.

The Mortgage Bankers Association says it has “strong concerns” about the guidelines, saying they restrict lenders from underwriting and managing risk differently from their competitors. That will in turn stifle innovation and undermine competition, limiting borrowers’ ability to choose “affordable interest-only products, said MBA Chairman Regina Lowrie in a statement.

“These products provide an important option for homeowners who have used them to tap their home’s increased equity for home improvements, to pay down debt and meet education and health care needs,” Lowrie said. “Despite the concerns expressed by some regarding the increased use of ‘nontraditional products,’ delinquency and foreclosure rates remain well within the range of historical norms.”

Stevens said nontraditional mortgages are “viable options for many qualified home buyers” and that “NAR supports lenders that make these loans responsibly. We encourage both regulators and lenders to monitor the impact of these new guidelines closely to determine if the guidelines unintentionally limit financing options for consumers who would otherwise benefit from nontraditional mortgages.”

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×