Nontraditional mortgage products have been available and utilized for years within the mortgage industry. These products were historically offered and managed with great attention paid to the heightened risk associated with them. In recent years, the popularity and availability of nontraditional mortgage products has allowed many borrowers to obtain mortgage loans who would not otherwise have been able to buy a home. It has also reduced the stringent risk management that originally accompanied these once limited loan options.
The Secure and Fair Enforcement Act of 2008 (S.A.F.E. Act) defines a “nontraditional mortgage product” as: “…any mortgage product other than a 30-year fixed-rate mortgage” (Title V, Sec. 1503 (6)). The definition as it appears in the Guidance on Nontraditional Mortgage Product Risks is not as broad. The Guidance offers a more narrow definition of “nontraditional mortgage product” which includes loans that have “interest-only” and “payment option” terms described as “…adjustable-rate mortgages (ARMs) where a borrower has flexible payment options with the potential for negative amortization.” 
The housing market in the U.S. has seen increased rates of default and foreclosure stemming, in part, from some of these products. Though the financial collapse of 2007-2008 cannot be based solely on one cause, the increased availability of nontraditional mortgage products, an increased applicant pool, borrower inexperience, instances of fraud and misrepresentation, and predatory lending, all contributed to the situation.
This course will provide an overview of the nontraditional mortgage marketplace and the current landscape of the mortgage industry with respect to traditional and nontraditional products, the subprime market, securitization, rules, restrictions, and procedures, and their application in mortgage transactions. Through the examination of rules, laws, regulations, discussion scenarios, and the history of nontraditional products, this course will provide a well rounded approach to understanding the worlds that exist outside traditional, 30-year fixed-rate loans.
 Guidance on Nontraditional Mortgage Product Risks, pg. 2