Explaining Exotic Loans


	Explaining Exotic Loans

Brian Wingfield

7-9-2008 5:51 PM

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tags:

exotic loans, subprime mortgage

Brian Wingfield says:

Courtesy of Slate.com...

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<div style="margin: 12px 0px; font-family: arial; color: #333333; background: #ffffff; border: solid 4px #e5e5e5; width: 100%; clear: left;"><div class="CM_CTB_Content_Wrap" style="margin: 0px; padding: 0px;background-color: #ffffff;"><div style="border-bottom: solid 1px #dcdcdc; white-space: nowrap; margin-bottom: 8px; background-color: #eeeeee ;background-image: url(http://clipmarks.com/images/source-bg.gif); background-repeat: repeat-x; height: 24px; line-height: 24px; vertical-align: middle; padding-bottom: 4px; color: #666666; font-size: 10px;" ><a href="http://clipmarks.com/clip-to-blog/" title="see clips that are hot right now"><img src="http://content.clipmarks.com/blog_embed/39be1b20-1203-4acf-a55d-43bb74655363/A51A29BB-655A-4F03-A1A4-C6F88B0BDDD0/" alt="" width="19" height="19" border="0" style="vertical-align: middle; margin: 0px 4px; display: inline; border: none; float:none;" /></a>clipped from <a title="http://www.slate.com/id/2195020/" href="http://www.slate.com/id/2195020/" style="font-size: 11px;">www.slate.com</a></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.slate.com/id/2195020/"><H1>What's So Exotic About an "Exotic Loan"?<SPAN class="h1_subhead">Its zany repayment plan.</SPAN></H1></blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.slate.com/id/2195020/"><P>The Federal Reserve will issue new lending rules to "<A target="_blank" href="http://www.nytimes.com/2008/07/09/business/09housing.html?hp">restrict exotic mortgages</A>" for people with poor credit ratings, according to a report in Tuesday's <EM>New York Times</EM>. What's so exotic about an exotic mortgage?</P></blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.slate.com/id/2195020/"><P>Exotic loans are easier to keep up with in the short-term, but they carry significant risks for borrowers down the road. For example, someone on an IO plan may have his payments double or even triple once the interest-only period ends. A minimum payment plan can result in "negative amortization," whereby unpaid interest is added to the principal—and the aspiring homeowner ends up owing more for his mortgage than he originally borrowed.</P></blockquote></div><div style="margin: 0px 6px 6px 4px;"><table style="font-size: 11px;border-spacing: 0px;padding: 0px;" cellpadding="0" cellspacing="0" width="100%"><tr><td style="background:transparent;border-width:0px;padding:0px;">&nbsp;</td><td align="right" style="background:transparent;border-width:0px;padding:0px;width:107px" width="107"><a href="http://clipmarks.com/share/A51A29BB-655A-4F03-A1A4-C6F88B0BDDD0/blog/" title="blog or email this clip"><img src="http://content7.clipmarks.com/images/c2b-foot.png" border="0" alt="blog it" width="107" height="17" style="border-width:0px;padding:0px;margin:0px;" /></a></td></tr></table></div></div>

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