For decades, the U.S. mortgage market was dominated by fixed-interest rate mortgages. However, during the last five years there has been rapid expansion of “private label” mortgages as Wall Street firms and other institutions (REITS, Hedge Funds, etc.) began securitizing mortgages. From 2003 to 2005 the share of private label mortgages increased from 13 percent to 29 percent, two-thirds of which are non-prime loans!

Non-traditional mortgage loans include adjustable-rate mortgages, piggyback seconds, option ARMs -today 70 percent of option ARMs pay the minimum, usually interest only – and interest only loans. These creative loan products have propelled the mortgage market to feverish heights and allowed many Americans to become homebuyers who otherwise would not qualify for home ownership. That’s the good news.

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