The article examines the credit risk of nontraditional mortgage products by analyzing the likelihood of default based on changes in collateral value and consumer liquidity. The study finds that exotic mortgage products in the subprime market have high default rates due to liquidity shortages. Monte Carlo simulations show that Option ARM contracts with minimum monthly payments have the highest probability of default compared to other mortgage products. The additional credit risks of these exotic mortgages are mostly systematic, suggesting that lenders may need to hold more capital to offer them.