Mortgage lenders have been making "stated income" loans for years, but the Federal Reserve is starting to have concerns about banks that fund loans without requiring the borrower to provide proof of income.Speaking at an American Law Institute-American Bar Association meeting Thursday morning, Federal Reserve Governor Susan Schmidt Bies also said regulators are concerned about low teaser rates on adjustable-rate "exotic" mortgages, including interest-only and payment-option loans. Asked by a reporter whether these products are a huge concern, Ms. Bies said no, but that the Fed is worried about how the products are being marketed to consumers. She told the ALI-ABA gathering that "to make sales happen faster" lenders are "lifting mitigating controls." The Fed and other regulators have issued proposed guidance on exotic mortgages, but final guidance will not come until after the comment period ends on Feb. 27.

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