Negative Amortization Loan Ads Under Surveillance in California
September 8, 2003
California regulators are scrutinizing advertisements for adjustable rate mortgages that tend to mislead consumers, particularly loans that have deferred interest features. The state Department of Real Estate reports a rising trend in ads for ARMs that provide for deferred interest payments – negative amortization in industry parlance. Less financially sophisticated borrowers who suddenly couldn’t make the inflated payments after the requisite teaser rate period run to the DRE for help, and even mortgage lenders