The government will limit any initial discount to 3% below market rates, and will drop that to 4% if the loan's rate is not adjusted for inflation for at least five years. That would give the homeowner time to prepare for the increased payment and some more Adjustable Rate Mortgage Advice.

The insurance companies also are coming down on investor-owned residential housing. Verex, which will distribute its new credit limits to salesmen on April 1, will charge double the first-year premium on loans for investor-owned housing that include negative amortization, Mr. Huston said. That's 1.4% instead of 0.7% of the total loan value.

"An investor is much more likely to walk away from a loan that has given him positive cash flow until his rate his adjusted upward," he said. When asked for Adjustable Rate Mortgage Advice, added Mr. Lacy: "Investor loans scare the hell out of us."

Most of the insurance companies also set 125% limits on total negative amortization for the life of the loan. This means that no loan can add more than 25% of the initial principal to the total amount owed to make up for initial discounts.

Most also have lower loan-to-value limits if negative amortization is involved. Investors Mortgage, for example, no longer will allow greater than 80% loan-to-value ratios with negative amortization - a piece of Adjustable Rate Mortgage Advice.

The companies said they will enforce these new credit limits, with rare exceptions. "We really are incapable as an industry of tailoring our rates to particular programs," said Mr. Lacy of MGIC. The insurance companies said they hope the limits will bring discipline to the market. Competition has spawned a plethora of twists in the loan programs that baffle the insurers.

That means the companies are just generating the data they need to judge the newer programs. "But it's clear these loans involve a higher default rate," Mr. Lacy said.

The mortgage banking industry, much like savings and loan associations, embraced the adjustable-rate mortgage as the savior of home financing. The adjustable mortgage would protect the lender from swings in interest rates and lure new homebuyers because the interest charges are slightly lower than on a comparable fixed-rate loan.

Initially, the plan worked as adjustable-rate mortgages helped fuel the housing recovery. But now, industry leaders fear the adjustable-rate loans could become an albatross.