But who will state the obvious consequence . . . that it translates to home price levels going back down.

Top Bank Regulator Worried by New Types of Mortgages

Comptroller of the Currency John C. Dugan told a community development conference today that new types of mortgages aimed at making homes more affordable may offer low monthly payments initially, but will lead to significantly higher payments later, potentially harming those they are intended to help.

"After the limited initial period ends, the monthly payment for the holder of a nontraditional mortgage must increase – even if interest rates stay flat – and the size of that increase can be very substantial," Dugan said in a speech to the Greenlining Coalition's annual economic summit. "At its core, the 'bargain' in a nontraditional mortgage is that the borrower pays a lower monthly payment now in exchange for the near certainty of a higher monthly payment later."

That potential for payment shock got the attention of the regulatory agencies and led to a proposed guidance that is now under consideration, he said. The guidance addresses fundamental issues involving nontraditional mortgages, including the prospect of substantial increases in monthly payments that borrowers may not be able to afford and may not understand.