Federal agencies have issued "guidance" on nontraditional mortgage lending, and a "statement" on subprime mortgage lending. State lawmakers have been at least as aggressive and have introduced over 80 mortgage reform bills to address such issues. This article describes current concerns surrounding nontraditional mortgage loans, details the substance of the Guidance and Statement, discusses expected regulatory and enforcement activity, and sets forth compliance initiatives financial services companies can use to reduce their enforcement and litigation risk.

This article was co-authored with Andrew L. Sandler and Benjamin B. Klubes and appeared in the Review of Banking and Financial Services, Volume 23, No. 11, and is reprinted with permission.