Friday, October 21, 2005

OCC Putting Pressure on Lenders Regarding Exotic Loans

This article is too good to pass up. Apparently, the Office of the Comptroller of the Currency (OCC) is putting pressure on lenders vis-à-vis exotic loans. Good. These sorts of loans sacrifice long-term affordability for short-term affordability. This will no doubt affect higher priced markets like Marin (which is currently at an historic extreme of unaffordability) more heavily than lower priced markets. Someone on this blog commented that in Marin a very high percentage of all new loans are some sort of interest-only loan. Please chime in whoever you are.

Some choice quotes:
"...the increasing use of interest-only and option adjustable rate mortgages has put federal regulators on high alert."

"Will the inability to gain easy access to these creative mortgage products finally help let some of the air out of the inflated housing bubble?"

"It's certainly a distinct possibility, said Andy Laperriere, managing director at ISI Group, a research firm."

""I think it will affect a meaningful amount of loans," he said. "It'll be enough to take the marginal buyer out of the hottest markets and therefore slowdown or even stop some price appreciation.""

"Experts certainly see some correlation between the availability of these products and the surge in housing prices. Laperriere added that in high-priced markets such as California and Washington, interest-only and option ARMs make up about 50 percent of the mortgages used to finance homes."

"The new standards are likely to take some marginal players out of the market and may make sellers reconsider their exorbitant asking price as interest rates rise."

""You're going to see a pullback in prices as inventories grow," said Neil Garfinkel..."

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