What did we see in the U.S. mortgage market as home prices rose and interest rates declined? First, low teaser rates. Then higher loan-to-value ratios. Then 100% financing. Then low-amortization loans. Then no-amortization loans. Then loans requiring no documentation of employment or credit history. All these things made it possible for more buyers to stretch for more expensive homes, but at the same time they made mortgages riskier for lenders.
