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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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From: russwinter	12/1/2005 5:21:00 PM
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Thursday, December 01, 2005 Lenders Face 'Litigation Risk': Dugan thehousingbubble2.blogspot.com Reuters reports on statements from a banking regulator. "U.S. bank regulators intend to propose guidance on non-traditional mortgage products by the end of the month because of risks associated with a softening housing market, Comptroller of the Currency John Dugan said on Thursday." "'Are lenders really prepared to deal with the consequences, including litigation risk, of providing such products in markets where real estate prices soften or decline, or where interest rates substantially increase?' Dugan said." And no link available for this Dow Jones newswire item. "John Dugan said Thursday he has grown increasingly concerned by risks to both borrowers and lenders from relatively exotic negative-amortization and payment-option mortgages." "Regulatory guidance on mortgage lending, now in the works by the Office of the Comptroller of the Currency and other bank supervisors, will give a focus to negative-amortization mortgages and payment-option adjustable rate mortgages, or ARMs, considering the 'payment shock' these loans can carry for unwitting borrowers, Dugan said." "'In the last two years,...we have seen a spike in the volume of payment-option ARMs, which are no longer confined to well-heeled borrowers who can clearly afford them,' Dugan said in remarks prepared for delivery to the Consumer Federation of America.

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