A Little Learning Music: Then came Interest Only (I/O), where there was no principal repayment. I called these loans “Rent with an option to default.” Lastly, we had the Negative Amortization (Neg/Am) mortgages, where the borrower paid less than the monthly interest charges, with the difference added to the principal owed. Hence, with each passing month, the mortgagee actually owed more on the house than the month before, rather than less. These loans defaulted in enormous numbers.
From Ridholtz today