March 1, 2010 (FinancialWire) — Mortgage funder Freddie Mac (NYSE: FRE) announced TODAY that on or about September 1, the company will cease purchasing and securitizing interest only mortgages, including Freddie Mac Initial Interest fixed-rate and adjustable-rate mortgages.

Interest only mortgages provide for interest-only payments for a specified period of time beginning with the first monthly payment after the note date, and principal and interest payments on a fully amortizing basis for the remainder of the mortgage term.

The loans are a significant cause of concern given their widespread use, especially by subprime underwriters, during the 2001-2008 real estate bubble in the U.S. Many borrowers who opted for these loans found themselves unable to make the monthly payments once the interest only “teaser” period had expired and the monthly payment amounts rose precipitously.

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