New inflow of mortgage money
The housing market, which has been becalmed by high interest rates, received some fresh air Wednesday. The Federal Home Loan Mortgage Corporation, in conjunction with with Merrill Lynch & Co. and Salomon Brothers Inc., said it would work with mortgage lenders across the country in providing $500 million in growing equity mortgage loans.
In the program offered by the Mortgage Corporation, homeowners' monthly payments increase by 4 percent per year, with the increase applied to principal, not interest. According to Philip R. Brinkerhoff, president of the Mortgage Corporation, a growing equity loan reduces the interest cost to the homeowner by up to one-half, compared with equivalent 25- or 30-year conventional fixed-rate loans. Since the loan is paid off quicker, growing equity mortgages are more attractive to investors.