There has been a lot written about how lending standards have eased which has help promote the rise in housing prices with non-traditional loans. The Federal Reserve released a report that said US banks eased terms for commercial and industrial loans while residential loans remain unchanged. [Note: Subscription] 20% of domestic banks saw increased demand for mortgages.
The good news is that restrained lending requirements, especial on investor properties, will help keep price growth in check. However, The Fed report seems to contradict the recently released report by the Mortgage Bankers Association [Note: Subscription] which said that lending standards continued to slide.
The Fed Report also said that use of non-traditional mortgages continues to rise.
[Matrix] piggyback loans
Nontraditional mortgage products include adjustable
rate mortgages with multiple payment options
and interest-only mortgages.
Interestingly, the lenders reported that less than 15% of the mortgages were non-traditional, which is less than the impression given in the media right now. Still, its of concern because highly leverage buyers are less able to weather a market downturn if one were to occur.