WASHINGTON — At 64, and looking toward his retirement next year, Willie Lee Howard agreed to refinance his duplex in Washington, thinking that a fixed-rate loan would help stabilize his finances.

What Howard got instead was a mortgage he did not understand. Baffled by the loan documents he was mailed after the closing, he consulted an AARP lawyer and learned that he now had an interest-only loan, a new and controversial kind of mortgage. Howard was told that under its terms, his mortgage balance will rise instead of fall and that he will need to refinance in 10 years, when he may be too old to work.

"This is a bunch of junk they done to me," said Howard, a construction worker.

Howard's chagrin at his mortgage's complex provisions illustrates the confusion felt by many borrowers struggling to adapt to a radically transformed home lending market. Consumer advocates say most people learned about mortgages from their parents and grandparents, who typically put down 20 percent on a 30-year fixed loan on which they always knew what their payments would be.

FINE-PRINT SURPRISES

Those long-standing assumptions have been challenged in recent years by the rapid proliferation of new loan products with looser credit requirements and fluctuating payment plans. Although the newer mortgage products allow almost anyone to buy or refinance a house, consumer groups say the loans often contain land mines hidden in the fine print.

Consumer advocates say the loosened standards are putting more people at risk as loans originally designed for sophisticated individuals are being marketed to far-less-savvy borrowers.

"Consumers haven't caught up with the dynamics of the market," said Allen Fishbein, director of housing and credit policy at the Consumer Federation of America. "They are still thinking of how it used to be, but it isn't like that anymore."

Alternative mortgage loans were first developed for a handful of people with promising long-term earnings potential: young lawyers destined to make partner, doctors finishing medical school or stockbrokers who get large commission checks several times a year.

But as housing prices have surged, outstripping wages in the most expensive markets, alternative financing has become a popular path to homeownership.

These new loans come in many forms. Nontraditional mortgages allow borrowers to pay only the interest on the loan or even only a portion of the interest each month, without being required to pay down the principal. Nationwide, more than a third of borrowers who got loans in the first nine months of 2006 got nontraditional loans, up from about 2 percent in 2000, according to First American LoanPerformance, a real estate information firm.

"Piggyback" loans allow people to borrow for a down payment, sparing buyers the trouble of saving for years and letting them avoid paying mortgage insurance, which is usually required on loans with down payments of less than 20 percent. In 2005, about 22 percent of people buying homes took out piggyback mortgages, according to the Federal Reserve.

"Subprime" loans are available to people who have bad credit, though they charge interest rates 2 to 3 percentage points higher than the rates charged to borrowers with good credit. About a fifth of the loans originated in 2006 now fall into that category, up from about 5 percent in 1999, according to the Federal Reserve.

Jim Sugarman, supervisory attorney at AARP's financial-abuse unit, says these alternative loans offer new opportunities but carry added risks. About 59 percent of subprime loans have adjustable rates, according to the Mortgage Bankers Association, and any sudden spike in interest rates would push payments higher.

HOMEOWNERS CAUGHT

In a rising real estate market like that of the past few years, borrowers who fall behind on their mortgages could sell before going into default. For that reason, lenders haven't been too worried about repayment. But now, with home prices flat or falling, many homeowners may not be able to sell their homes for enough to cover their mortgage balances.

Alternative-loan products are giving many people access to homeownership, counters Steve Calem, vice president with American Bank in Bethesda, Md. "Interest-only loans help people get into their first house," he said. "Interest-only loans minimize their payments, when people know their income is going to be going up. It gives them flexibility."

Most consumers have only themselves to blame because they are not doing enough research on the mortgage market as it has grown increasingly complex, said Christopher Cruise, who trains mortgage brokers at major lending companies.

"The American consumer's ignorance of mortgage procedures in the past hurt them a little," he said. "What's different now is that it'll hurt them a lot. The stakes are a lot higher."

Sugarman said that in the past, lenders didn't make these kinds of loans because they put financial institutions at risk. Bad real estate loans marked the beginning of the Great Depression, and subsequent banking reforms required lenders to consider the soundness of their lending practices. That made loans safer for borrowers and lenders alike.

What has changed is the booming market for real estate securities. Major financial institutions now put thousands of loans together and sell them in slices to investors. That means lenders seldom get caught holding the loans.

The new mortgage products have fueled record profits for the lending industry in recent years. Brokers can generate tens of thousands of dollars in additional fees, beyond what they earn on traditional mortgages, by placing borrowers in these loans, Cruise said.