In Dr. Seuss's famous book, Sam-I-Am is finally successful in convincing his unnamed friend to taste Green Eggs and Ham.
Say!
I like green eggs and ham!
I do! I like them, Sam-I-am!
And I would eat them in a boat.
And I would eat them with a goat...
And I will eat them in the rain.
And in the dark. And on a train.
BUT IT WASN'T AN EASY SELL. Because no one likes green eggs. And no one likes NEG AM.
Negative amortization. In case you have been living on another planet, you know that this kind of mortgage is not something that elicits bragging rights at cocktail parties like a 5.5% fixed rate mortgage might. Neg am is the devil child of the mortgage world.
I say, admitting to having a neg am loan for most people is, well, somewhat like talking about your credit card debt.
You have it, you live with it, but you aren't proud of it. And certainly, you would prefer it if you DIDN'T have it. Let's face it, neg am loans have been crucified by the media, and most people consider them downright distasteful.
I like eggs, Sam-I-Am, but I do not like green eggs.
Somewhere along the line, a Sam-I-Am mortgage person convinced you to sign up for a neg am loan. I don't think anyone would willingly come in and order green eggs or neg am, do you?
And even though you tried to understand how exactly a neg am loan works, I will place a bet that over 90% of those who HAVE neg am loans, did not UNDERSTAND neg am loans when they signed those closing papers. They signed up because of that LOW PAYMENT OPTION.
Yum. Green anything tastes better when the green stuff is cash.
I don't see anything wrong with neg am loans. They are more risky only because they are plain old adjustable rate loans that constantly adjust, and as such, they carry the risk that your payment could go up. But most critics will scream right here that "there is potential for NEGATIVE AMORTIZATION!!!" (the 2 most vilified words in mortgage world are negative amortization).
But the key word here is "POTENTIAL". You also have "potential" to max out your equityline. Why is it okay to admit you maxed out your equityline, but not okay to say you are "going negative" with your neg am loan?
After all, in both cases you are simply borrowing from your equity. That's right, a neg am loan could be described as an embedded equityline.
This is fine for real estate markets where houses appreciate, not so good for times when houses depreciate.
Which is why (lightbulb!) (1) Neg am loans and equitylines have all but become extinct in the current mortgagescape and (2) You should NOT be making the lowest payment option, unless that is your only option financially.
No sense eating up equity when the market is doing a nice job of that without any help from you.
So while you may have risk, you also have reward...which is the ability to "borrow" from your equity by choosing to make the lowest payment option offered.
I wonder how many people have been saved from losing their house as a result of being able to make the lower payment? Probably many.. but you won't read this in any newspaper: "Homeower Saved from Foreclosure by Low Payment Option on Neg Am Loan!"
It is a great time to restructure your neg am loan. Not because it is the evil step child of the mortgage world. Because grabbing a fixed rate mortgage NOW offers you the opportunity to eliminate the RISK and uncertainty of your payment going higher. Only you know if losing your low payment option is worth eliminating the risk of having a constantly adjusting rate.
But you SHOULD consider it.
Should you choose to keep your neg am loan, manage it wisely. Think of the low payment option as an insurance policy against times when you cannot afford to make the full payment, and always try to make at least the "interest only" payment.
Written by Janet Guilbault, Mortgage Lending Expert, Based Out of the San Francisco Bay Area
Janet Guilbault, California Mortgage Expert 
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Thanks for your perspective on these loans. Alot of folks would like to get a fixed rate at this point in time, but their equity has been eaten up by this market making it impossible for alot of folks wanting this option.