State officials have instructed mortgage brokers and other non-depository lenders to follow new guidelines for informing consumers about risks of nontraditional loans.

So-called exotic loans provide more flexibility for consumers and have been sold more widely in recent years, creating federal and state regulator concerns that borrowers may use such loans without fully understanding terms and risks.

Examples of nontraditional loan features include interest-only payments, relaxed income documentation and adjustable-rate mortgages with minimum payment options.

"Mortgage products such as payment-option ARMs and interest-only mortgages can carry a significant risk of payment shock and negative amortization that may not be fully understood by consumers," the guidelines say.

Recently issued federal guidelines addressing the concerns applied only to banks, credit unions, savings associations and other federally insured lenders.

The state guidelines, issued by the Department of Commerce and Consumer Affairs Division of Financial Institutions, mirror the federal ones and apply to state-licensed mortgage brokers and nondepository lenders that make most home loans.

Among the new standards are evaluating a borrower's ability to repay a loan based on a rate after a low introductory rate expires, and doing more to verify income, assets and debts for higher-risk loans.

Lenders are also instructed to clearly state risks in marketing materials and tell customers earlier in the loan-application process about the likelihood of increased future payments.

The guidelines also suggest printing monthly statements for payment-option ARMs to show comparative results on a loan's balance using the different payment options.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.