MBA Challenges Consumer Groups on Hybrids

The interest and principal payments on hybrid adjustable-rate mortgages do not increase by 40% to 50% as alleged by consumer groups, the Mortgage Bankers Association says in a letter to the new Senate Banking Committee chairman."Hybrid ARMs are not 'exploding mortgages'," the MBA says in the letter to the chairman, Sen. Christopher J. Dodd, D-Conn. The interest rate on hybrids generally increase by 2-3 percentage points after the fixed-rate period expires, but most lenders cap the adjustment at 1.5% to 2%. MBA stressed that bringing hybrid ARMs under the nontraditional mortgage guidance is "unwarranted" and will only curtail the availability of credit to homebuyers and borrowers seeking to refinance. Sen. Dodd recently joined with five other senators in urging bank regulators to include subprime ARMs, such as 2/28 ARMs, under the nontraditional mortgage guidance. The MBA can be found online at http://www.mortgagebankers.org.