Banking

  Federal financial regulatory agencies issued final guidance on risks posed by residential mortgage products that allow borrowers to defer principal and sometimes interest payments. Often referred to as “nontraditional” or “alternative” mortgages, these loans typically allow a borrower to trade lower payments early in the mortgage for higher payments later. Borrowers may not fully understand the risks of the products, which have long been available but in recent years have been offered by more institutions.

The document, Interagency Guidance on Nontraditional Mortgage Product Risks ( http://www.federalreserve.gov/boarddocs/press/bcreg/2006/20060929/attachment1.pdf ), was issued jointly by five agencies: the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve, the Federal Deposit Insurance Corp., the Office of Thrift Supervision and the National Credit Union Administration. In response to feedback last year, the agencies also issued model loan disclosures for public comment in a related document, Proposed Illustrations of Consumer Information for Nontraditional Mortgage Products ( www.federalreserve.gov/boarddocs/press/bcreg/2006/20060929/attachment2.pdf ).