Alan Greenspan, Americas Federal Reserve chairman has followed up on last months warning that the US property market may be set to crash by voicing concern at the worrying decline in standards in the mortgage lending industry.

Mr Greenspan is concerned by interest-only loans, floating rate mortgages, and other "more exotic" forms of home financing including loans where borrowers do not pay the full interest cost for an initial period and it is added to the principal.

"They are seen as vehicles that enable marginally qualified, highly leveraged borrowers to purchase homes at inflated prices. In the event of widespread cooling in house prices, these borrowers, and the institutions that service them, could be exposed to significant losses," Mr Greenspan said.

However, Mr Greenspan said problems were still largely confined to a number of local markets.
"The vast majority of homeowners have a sizeable equity cushion with which to absorb a potential decline in house prices," he said