BANKING & FINANCE - July 26, 1994

Fannie Mae Approves New Loan: The Federal National Mortgage Assn. will announce today that it will give its all-important blessing to a new mortgage that allows consumers to build up a savings account while they pay off their loans. The product, called AIM, will initially be offered in 50 U.S. cities, including Los Angeles. It is expected to kick off a flood of similar “investment-linked” mortgages that promise high returns with minimal costs. AIM will allow consumers to buy a home with a low down payment, if they put a substantial chunk of cash into an insurance annuity at the same time and pledge the annuity as security for the loan. Interest on the money in the annuity builds up tax-free until withdrawn at retirement. But it will be difficult to drop the annuity without refinancing the loan, Fannie Mae officials say.