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Let's talk some more about negatively-amortizing ARMs and why they are not universally bad mortgage products, as Business Week would have us believe.

To reach agreement on that point, however, we need to agree on something else:

Financial instruments -- including mortgages -- are sophisticated and heavily nuanced. 

Before ever choosing a financial product to meet short- and long-term financial goals, homeowners should speak with a qualified adviser about the pros and the cons of that choice.

Hopefully, you all agree -- it's just good sense.

Negatively-amortizing home loans are terrific products for certain people.  For example, because the loan product allows homeowners to defer mortgage interest, a commissioned salesperson with a lousy year can use it to maximize tax deductions.

Because a commissioned salesperson's income can fluctuate from year-to-year, so can his tax bracket.

Unfortunately, most salespersons don't know what kind of year they're having until the year is halfway over. 

By paying the "minimum required payment" each month, the salesperson is actually adding unpaid mortgage interest to his loan balance month after month.

This is similar to a credit card minimum payment -- it satisfies the creditor but the balance due is higher the next month.  The onus to pay the bill in full, after all, is left to the debtor.

After making 12 months of minimum payments, the salesperson can evaluate his year and decide whether or not to pay the deferred interest.

If he earned a strong income, it would make sense to pay the interest because that would likely increase his tax deductions in the current year.

If he earned a weak income, claiming those tax deductions could be somewhat pointless because what good are tax deductions if you're two or three tax brackets below your usual levels?  Instead, carry the interest forward into the next year and claim it then.

This is a sophisticated strategy, obviously, and can apply to a lot of Americans:

• Home builders
• Stock traders
• Real estate agents
• Attorneys working on contingency

Where Business Week makes its story, though, is in highlighting people that are not commissioned and who just wanted "low payments".

Many people choose negatively-amortizing loans because it helps them to maintain a certain lifestyle.  This is the wrong way to apply NegAm loans to financial planning.

In the end, applying the proper mortgage product to meet payment objectives comes down to basic fiscal literacy and surrounding yourself with advisers you can trust.

Negatively-amortizing loans are not toxic mortgage products -- they might just be toxic for you.

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Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.