Legislature starts questioning unconventional real estate loans

It may be closing the barn door after the horse has bolted, but the California Legislature has begun considering restrictions on unorthodox mortgage-lending practices. About half of all new home loans in California are something other than the traditional 30-year fixed loan and this has allowed hundreds of thousands of Californians to buy homes they otherwise could not afford. The loans use features such as no money down and variable interest rates in exchange for higher bills that kick in years later. Regulators said many of those riskier loans were taken out in 2004 and 2005 and will start resetting to higher rates this year. Some areas of the State have already experience an increase in mortgage defaults as a result of these unconventional loans.