New home sales are slipping, and bad credit people seeking a high risk mortgage loan are paying higher interest rates. Will these factors cause the home market to collapse?

Exotic mortgage loan programs, such as the interest only loan, are being scrutinized by the Federal Reserve and the Federal Deposit Insurance Corp (FDIC). Bank regulators are warning lenders to preserve due diligence when issuing exotic mortgages. The housing market is already suffering, and these actions may result in fewer mortgage loans and subsequently less demand for homes.

Nontraditional mortgages offer low introductory interest rates or initial interest only payments, as well as adjustable rate mortgages (ARMs) with payment options.

Regulators are concerned initial minimum payment plans may not cover interest costs, and could result in borrowers not being able to afford the payments once the introductory period expires.

Many high Risk borrowers; who couldn't afford a home loan on traditional terms, used nontraditional mortgage packages to make their dream come true, yet it could eventually become a nightmare.  During the first half of 2006, 30 percent of all mortgages were nontraditional.

Foreclosure Threat: High risk borrowers who opted for nontraditional loans may become 'top-heavy', meaning they could owe more for their home than it is worth. Should these home buyers become unable to continue payments, they may not be able to break-even when selling or may not be able to sell at all due to a declining housing market.

Apply online for a good or bad credit mortgage loan quote.