The Washington Post has this report on a lending crackdown. "As the real estate market slows, some mortgage lenders are trying to prop up profits by relaxing lending standards for certain types of loans, endangering borrowers and financial institutions, a top banking regulator said yesterday."

"John M. Reich, director of the Office of Thrift Supervision, warned that some lenders are making it too easy for unsophisticated borrowers to take on risky nontraditional mortgages that they may not fully understand. Reich said regulators are 'closely monitoring' the growth of loan types in which the payments can suddenly double, creating a payment shock that could force borrowers into foreclosure if housing values were to fall and could also cause financial losses for the lenders who make the loans."

"John Dugan, comptroller of the currency, who also spoke at the meeting, echoed Reich's concerns about the volume of commercial real estate lending. He also likened it to the lending pattern that preceded the savings and loan bailout of the early 1990s."

"But a regulatory crackdown on the loans, known as interest-only and option mortgages, could prove problematic for some pricey real estate markets, such as the Washington area, where buyers have become increasingly dependent on such loans."

"About two-thirds of all people who bought homes in the Washington area in 2005 used interest-only or option mortgages, many of which have adjustable interest rates, up from 2.2 percent in 2000."

"'These types of products have been enablers when it comes to allowing home prices to rise,' said Christopher Cruise, a Silver Spring-based mortgage trainer who runs classes for lenders and regulators around the country. 'Without these products, homes couldn't be purchased. If they are taken off the market, it could precipitate a disaster of epic proportions.'"

"'If people suddenly can't get an interest-only loan because the feds are clamping down on how many are out there, it'll drive the market down,' said Thomas Shaner, executive director of the Maryland Association of Mortgage Brokers. 'It'll have repercussions for market values,' because fewer people will be able to buy or people will buy less-expensive homes than they might otherwise."