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It looks like the first part of the 21st century may be thought of as the days of easy money. The combination of historically low interest rates and loans that only a mortgage broker could love created an unprecedented buying opportunity for homeowners.

Now as interest rates have climbed and some of the more esoteric parts of these non traditional loans are starting to come due, we watch Congress start hearings and every bureaucrat in the government come out from under their rocks to propose changes, or even worse, booklets.

My question is this, if these folks are looking out for the publics good, or are such experts that they are being paid to know about these industries, why could they not be in front of the trends? Guidelines for interest option loans are great, but not after the loans have been written and folks are underwater?

Lets face it, there are bad mortgage brokers just like there are bad people in almost every industry. But these folks were allowed to work unfettered getting extra commissions by putting people into bad loans. Think about that for a second. The mortgage companies were paying the brokers extra to put people into loans that may come back and hurt the lenders or those they sell the paper to? Instead of getting someone into a solid long term loan that could be a win win.

And now after the fact the government will race in and try to educate and reform the system. If this was not so typical it could be funny.

The GAO said that from 2003 to 2005, non traditional mortgages, comprising mostly interest-only and payment-option ARMs, grew from less than 10% of all residential mortgage originations to about 30%. They were highly concentrated on the East and West coasts, especially California, the GAO said.
Federal banking regulators last year issued some guidance to lenders about handling non traditional mortgages and providing would-be borrowers with information about them. Further guidance is expected.
Regulators also are working on a booklet, expected to be published later this year, that will provide consumers with additional information on interest-only and option ARMs, said Sandra Braunstein, director of the Federal Reserve’s division of consumer and community affairs. via The Detroit Free Press .

Related posts:

1. Federal Legislation to Ease FHA Loans May Hurt New Homeowners
2. Federal Regulators Stepping In To Curtail (Evil) Mortgage Practices
3. Qualifying for Non Traditional Mortgages Gets Harder
4. IndyMac Hurt by Piggyback and Builder Loans
5. Federal Reserve Issues Loan Company Guidelines - Work With Defaults