Firm Warns About IO Subprime Loans

The growing popularity of interest-only home loans in the subprime mortgage market "may trap unwary New York metro area homebuyers into situations from which the only exit is default and foreclosure," according to Foreclosures.com, a Sacramento, Calif.-based investment advisory firm.Alexis McGee, president of Foreclosures.com, said homebuyers who take out such loans can find themselves with homes they can't afford when the loans convert to what she called "real world" mortgages. "These loans are very seductive," Ms. McGee said. "They offer below-market interest rates for two or three or five years, with no reduction of principal, and then convert automatically into fully amortized loans for the balance of the 30-year term."