Report: U.S. buyers rush into risky loans

NEW YORK, June 3 (UPI) -- An increasing number of U.S. house buyers are choosing risky mortgages like adjustable-rate and interest-only loans.

A survey conducted by the Mortgage Bankers Association found such mortgages accounted for 63 percent of all loan originations in the second half of 2004.

Further, San Francisco's LoanPerformance firm found about a fourth of buyers nationwide are taking interest-only loans, a kind of mortgage that can have fixed-rate features but is usually adjustable, the Washington Post said Friday.

Many economists are worried so many buyers are choosing such mortgages when fixed-rate loans remain at near-record lows. With interest rates expected to rise, many borrowers could find themselves unable to service their mortgages in a rising interest rate environment.

"I don't know anyone who thinks rates will come down," said economist Dean Baker, co-director of the District-based Center for Economic and Policy Research. "Almost everybody expects rates in three or four years to be much higher than they are today. People who are professionals are systematically misadvising people. They want to make the deal."