Report: Interest-Only Loans Unfairly Blamed for Mortgage Crisis

Have policy makers learned the wrong lessons from the mortgage crisis?

A new paper suggests that there’s been a rush to judgment against mortgage product features such as interest-only payments and pre-payment penalties, or fees charged for paying off a mortgage before a specific date.

Michael Lea, the director of San Diego State University’s Corky McMillin Center for Real Estate, examined mortgage products in 12 different countries and found that mortgage design didn’t necessarily lead to higher defaults in other countries, even in those that had greater home-price volatility.