Interest-only loans accounted for 26% of all mortgages funded in the second quarter, according to exclusive survey figures compiled by National Mortgage News.Lenders originated $213 billion in IO mortgages during the second quarter, compared with $141 billion in the first. In the first quarter, IOs accounted for 21% of all loans funded. In the fourth quarter, IO production accounted for 15% of all loans ($101 billion), survey figures show. (NMN is the only publication that has a history of tracking IO production.) IO loans and payment-option ARMs lower monthly payments for consumers, because no principal is being paid down, but are considered somewhat controversial because consumers cannot build equity in their homes unless the property rises in value. Some lenders say the loan is being used by speculators who are betting on rapid price increases in hot housing markets.

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