"Exotic" mortgages -- in particular, payment-option ARMs and interest-only loans -- were a factor in the nation's housing boom of the past few years, a panel of economists told a Senate subcommittee on Wednesday.Richard A. Brown, chief economist of the Federal Deposit Insurance Corp., told the Senate Banking subcommittee on housing that in "hot housing markets" payment-option adjustable-rate mortgages and IO loans were used to help qualify homebuyers. Mr. Brown and other panelists said exotic loans and other factors -- including low interest rates, market demand, lack of developable land, and rising commodity prices -- fueled a home price boom that began in 2003. David Seiders, chief economist for the National Association of Home Builders, said the performance of option ARMs and IO loans is an "area of substantial uncertainty" for the market. He said "we know the dollar volume" of option ARMs originated, but "we don't know the features. Is it a payment-option ARM with a piggyback loan too?" Some economists believe that when option ARMs adjust at higher note rates, many consumers may default on the loans. Next week the subcommittee will hold a hearing on the role exotics play in the mortgage market.
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The massive mortgage business saw a first quarter profit mitigated by nearly $300 million in hedging losses.
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The Consumer Financial Protection Bureau has seen excessive property-inspection charges, fees that loan mods should eliminate and improper line-item labels.
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Michael Tannenbaum, whose experience in the financial services industry spans over 15 years, has a track record of helping companies scale and grow.
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The latest rate increases contributed to a 1% drop in purchases from the previous week and 15% annually, according to the Mortgage Bankers Association.
April 24