FWIW, I’ve had the opportunity to chat with my 97 year old grandmother who vividly remembers the housing market from that time period. She refers to the IO loans as “Balloon mortgages” and the idea behind them was that the borrower would supposedly be able to save the money necessary to pay off the balloon payment at the end of the loan period. Not that she thought this was a great idea. She watched the good times turn to job losses, cascading defaults and foreclosures in Los Angeles as a newlywed.
When I explained the exotic financing currently being used in the RE market that is enabling people to stretch their finances into houses they really can’t afford, she was absolutely stunned. She couldn’t believe that people could be even more foolish all over again.
