NAR supports mortgage education while encouraging innovation

WASHINGTON -- Oct. 5, 2006 -- Guidance on nontraditional mortgages issued last week by federal banking regulators will help ensure that lenders inform consumers about the risks related to nontraditional financing options, including interest-only and option-payment adjustable rate mortgages, says the National Association of Realtors® (NAR).

"The National Association of Realtors is very concerned that some borrowers are using nontraditional mortgages without fully understanding the risks involved, and supports the federal banking agencies’ new guidance requiring lenders to explain these mortgages and their associated risks to consumers," says Thomas M. Stevens, NAR president.

"It is imperative that borrowers fully understand the risks associated with such products, which is why, last year, NAR and the Center for Responsible Lending created the consumer education brochure, "Specialty Mortgages: What are the Risks and Advantages?" to help our Realtor members counsel their clients and customers, adding value to the real estate transaction," Stevens says.

In addition to proposing that lenders educate consumers about the risks of nontraditional mortgages, the final guidance also recommends that lenders review current underwriting standards and improve risk management strategies. While lauding consumer education efforts, NAR cautioned federal regulators in its submitted comments on the proposed guidelines not to restrict innovation in mortgage lending and, by extension, opportunities for homeownership.

"When used correctly, nontraditional mortgages are viable options for many qualified homebuyers, and NAR supports lenders that make these loans responsibly," says Stevens. "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."

To obtain a copy of "Specialty Mortgages: What are the Risks and Advantages?" go to www.realtor.org and search on "Specialty Mortgage."

© 2006 FLORIDA ASSOCIATION OF REALTORS®

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