Banks get nontraditional mortgage advice

Federal regulators directed banks on Friday to properly explain the risks posed to borrowers from interest-only and other nontraditional mortgages.

The guidance was aimed at addressing the fear that consumers don't understand all the repayment risks involved in these mortgages, including rising interest rates which could greatly increase their monthly payments.

The regulators said that banks needed to make sure that the loans they made were "consistent with prudent lending practices, including consideration of a borrower's repayment capacity."