Concerns about default risks and an uncertain regulatory environment have done little to diminish the fervor of the mortgage market’s heavyweights, who continue to make interest-only loans, option ARMs and other nontraditional products a key part of their product menus. Washington Mutual is so stoked about the outlook for nontraditional products, for instance, that the thrift plans to sell its entire $140 billion government-insured servicing portfolio and cut back on its origination of conventional fixed-rate mortgages in order to...