All About Interest Only Loans

It seems like the heavy use of interest only loans could be a catalyst for the eventual downturn in real estate prices. This article does a good job at trying to time the collapse.

"2007 especially, has the potential to be a real ugly epidemic as the negative amortization goes away on commonly used 3/27 IOs. Even the 2003 3/27 IO cohort with more appreciation and equity, who face regular amortization in 2006, should panic as soon as they see their "gains" dwindle away. It's problematic though that the markets will wait that long, as initial teaser rates are already rolling off. Reality checks and "leaving the party" stirrings are already taking place. I believe payment shock is already encouraging some speculators to cash out. Trouble should emerge as prices pause and roll over."