TOXIC OR EXOTIC LOAN TERMS; Current Federal Regulations state that conventional loans cannot have those things. What are some examples? Interest-only payments, length longer than 30 years, negative amortization, large fees and charges, pre-payment penalty etc. Can you still get them? Another word for the public: Portfolio Loan. That is a loan made by a bank that they do not sell to anyone and hold for themselves. Some of these loans lately have been allowing interest-only payments, but the reports stress that this is only for higher-income, higher-assets, favorite of the bank. Incidentally, Ability to Pay rules still apply. What about these items? Obviously, interest-only loans were misused before the chaos, but they do have their uses as we just stated. What about NA or negative amortization? Havent seen any of those around. Considered too dangerous because the payments you make are not enough to cover the interest so your loan gets larger each month. Yes, they were extremely misused in the past. Me, I think they could have legitimate uses for some risk-taking people. Once an underwriter told me in an officious teachers tone, Did I realize that the loan was a negative. I told her Yes, and that I preferred even more negative if she could arrange it. Perfect negative amortization would be no payments at all. There are times that I would have liked a loan like that. In fact, in todays market that is called a Reverse Mortgage.
Posted on: Mon, 31 Mar 2014 22:39:26 +0000
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