Reply #25: Mortgage Lenders Getting More Creative

[54anickel]

http://story.news.yahoo.com/news?tmpl=story&cid=509&ncid=749&e=9&u=/ap/20040524/ap_on_bi_ge/managing_money_mortgages

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To generate new business, lenders are getting even more creative and according to some observers, pushing the envelope too far.

Companies are offering loans that allow borrowers to skip a payment while those that require only interest payments are also growing in popularity.

These products are certainly appealing, especially to those who are cash-strapped, but critics worry that homeowners may be misled by the benefits.

"Letting people forgo a payment on their mortgage is outright encouraging them to be undisciplined," said Gary Schatsky, a financial adviser and former chairman of the National Association of Personal Financial Advisors. "That's very alarming to me, especially given the fact that we are dealing with something as important as a mortgage."

Fannie Mae, the nation's largest mortgage finance company, backs this type of loan in a pilot program called PaymentPower.

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