Freddie Mac Joining IO Bandwagon

Freddie Mac is joining the bandwagon for interest-only mortgages.Beginning July 1, the big secondary market institution will purchase and securitize an entire suite of IOs. The new "Initial Interest" loans, the first new products for the company in a decade, include several ARM options and a pair of fixed-rate mortgages, one with an initial 10-year interest-only period and the other with 15 years of interest-only payments, the company said at the Mortgage Bankers Association's National Secondary Market Conference & Expo in Washington. The new products not only give borrowers a tool to manage their own particular financial situations, they also offer lenders "a range of options to build a robust product line and increase origination volumes, and a competitive secondary market outlet if they're already originating these types of mortgages," said David Stevens, senior vice president of mortgage sourcing at Freddie Mac. Fannie Mae has been making a market for IOs since April 2001.