With Fannie Mae now buying 40-year mortgages, it will not be long before those loans end up in securitizations. In response to this, Lehman Brothers analysts put 40-year mortgage collateral under the microscope and looked at how those loans would likely perform in securitized pools.

In the report, Lehman compares 40-year loans to the other increasingly popular mortgage affordability product, IO loans. Both are structured to reduce monthly payments, with the IO loan offering greater monthly savings at the front end since there is no principal amortization component, as with the 40-year.

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