Exotic Mortgages Remain Popular
Despite Their Increasing Risks

By Rachel Koning Beals From Marketwatch

Call it the triumph of the exotic mortgages.

Such loan innovations allow home buyers to put little money down and make low monthly payments. They've also poured fuel on one of the hottest and longest housing booms in the nation's history.

But in the wake of the Federal Reserve's push to take away easy money, low interest rates and red-hot home prices have faded away. With them went the main conditions that made interest-only and other flexible mortgages worth their risks. So the consumer's love affair with such loans is drawing to a close now, right?

Wrong.

Far from just another financing fad, exotic mortgages have become such a fixture on the U.S. housing landscape that they've proven to be a key lever for many borrowers even as they have become a greater danger at the same time.

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