Comptroller on Negative Amortization

The housing market has been hot - as hot as we have ever seen it. The lending industry has responded to the high price of houses with creative loans, some of which don't amortize - or actually have negative amortization. When a consumer takes out such a loan, both the consumer and the lender are counting on a rapid increase in housing prices. Without that increase, the loans present both consumer protection and safety and soundness problems. Comptroller Dugan spoke to this problem in his presentation at the Consumer Federation of America, he warned about the risks and suggested that additional regulation may be appropriate.

Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 10, No. 14, 12/05