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               American homeowners throughout the nation are
          being introduced to a new way of paying off their
          home - the biweekly mortgage prepayment program. 
          Biweekly mortgages differ from conventional 30 year
          loans because instead of paying one monthly payment,
          twelve times per year, a homeowner will make one half
          of the normal monthly payment every two weeks.
               Why should it matter if a payment is paid on the
          first of each calendar month or every two weeks, you
          might ask?  Well, let's look at this concept a little
          closer.  There are 52 weeks in each year.  There are
          also 12 months in each year.  If you divide 52 weeks by
          12 months you arrive at roughly 4 1/3 weeks per month.
               The month of January has 31 days or 4 1/3 weeks. 
          In February, there are only 28 days, and thus, there
          are 4 weeks even.  If you're like most homeowners,
          you'll make your house payment on the 1st of the month
          and will make 12 monthly payments per year.  Usually,
          the house payment is the single biggest expense!
          
          26 biweekly payments
          
               On the biweekly mortgage or payment plan, you will
          pay one half of your regular monthly mortgage payment
          every two weeks.  If we look at the number of weeks per
          year, there are 52.  Thus, if we are paying a mortgage
          every two weeks, we can easily calculate the total
          number of yearly biweekly payments by dividing 52 weeks
          by 2 (biweekly).  So, we come up with 26 biweekly
          payments each year.
          
          13 monthly payments
          
               Taken one step further, if there are 26 biweekly
          payments in a year, and you divide again by 2 (half the
          monthly payment), you will end up with 13 monthly
          payments instead of the usual 12.  All we have really
          done is to eliminate the windfall that occurs each time
          a month has several extra days.  Most Americans are
          paid biweekly, so this type of payment schedule is
          becoming very popular.
          
          They started in Canada
          
               Biweekly mortgages have been popular in Canada for
          two decades.  There are 3 principal reasons for this. 
          First, it makes sense to have loan payments correspond
          to paydays.
               Second, it also makes the mortgage payment easier
          to handle because you are paying half a payment as
          opposed to the full payment.
               Third, in Canada, mortgage interest is not
          deductible under their tax laws so anything that will
          lower the overall liability of each homeowner is of
          prime concern.
          
          U.S. banks get involved
          
               In the early 1980s, a few banks in the
          Northeastern U.S. caught onto the idea of biweekly
          mortgages but ran into some roadblocks.  Long term
          mortgages are ingrained in this country's financial
          history and making changes in the mortgage industry is
          not easy.
               Also, banks and mortgage lenders receive mortgage
          payment checks from homeowners at the beginning of each
          calendar month and so by changing to a biweekly payment
          plan, the banks would have to double the number of
          payments processed each month which would essentially
          double their mortgage servicing costs.  That by itself
          was enough to kill the biweekly concept entirely.
               There was also another hurdle that offered
          continuing resistance to biweekly mortgages in this
          country and that was how to pay for them. Back in the
          early 1930s, just after the Great Depression, Congress
          was trying to find ways to get the U.S. economy back on
          track.  The country needed housing badly but there were
          major problems to deal with.
               The largest problem with the housing industry
          after the Great Depression was lack of funds for
          construction and home loans.  Banks did not have much
          capital and each time they made a home loan, their
          resources were further depleted.
          
          The Fannie-Mae connection
          
               To correct this problem, Congress decided to
          create a quasi-governmental agency known as Fannie-Mae,
          the Federal National Mortgage Association.  Fannie-Mae
          was set up by the federal government under a federal
          corporate charter.
               Securities were sold to the public through
          brokerage firms and by buying stock in Fannie-Mae, you
          were essentially buying U.S. government-backed
          securities.  Thus, if you had a VA or FHA mortgage, you
          were basically buying part of your own mortgage.
               The money generated from the sale of securities
          was used to buy mortgages from banks throughout the
          country, thus replenishing the money supply.  This
          allowed each bank to make home loans and then resell
          the mortgages to Fannie-Mae to quickly recover their
          money.
          
          A huge success
          
               Fannie-Mae was a huge success and eventually
          gained competitors such as Freddie-Mac and others that
          bought mortgages from the banks and resold them as
          securities.  This continues to this day and is part and
          parcel of our financial system...which leads to another
          problem for biweekly mortgages.
               Since payments to investors are usually paid
          monthly, there was the problem of how to pass on
          investment distributions to investors.  No one was
          prepared to change this system, just for a clever new
          type of mortgage.  This became a roadblock to
          popularity for the biweekly.  Sure, they were popular
          for homeowners but if stockholders did not have an easy
          way to invest in the new mortgages, they were doomed to
          a lack of capitalization.
               Since biweekly mortgages had so much potential and
          were gaining popularity so quickly, many banks began
          offering them and retaining the mortgages in their own
          investment portfolio as a gimmick to attract customers. 
          And it worked very well as they became every more
          popular.
          
          Tremendous potential
          
               As Fannie-Mae became more involved with the
          biweekly mortgage, they realized its tremendous
          potential and saw its popularity gaining rapidly. 
          Since Fannie-Mae is essentially controlled by the U.S.
          government, the biweekly was pushed as an equity
          builder because the government likes to encourage
          Americans to invest and save...and the biweekly
          mortgage built home equity faster than anything!
               In early 1988, the final roadblocks for biweekly
          mortgages were removed by an announcement from Fannie-
          Mae.  They agreed to buy biweekly mortgages from banks
          provided the biweekly payments were debited from the
          borrower's account using the ACH (Automated Clearing
          House) run by the Federal Reserve System.
               Automated electronic reoccurring debits are far
          less expensive than opening envelopes with coupons. 
          Not only that, but Fannie-Mae also solved the
          investment hurdle by passing payments on to investors
          monthly.
          
          Roadblocks gone in 1988
          
               With these roadblocks removed in February of 1988,
          the biweekly mortgage had successfully become a part of
          the American mortgage system and could now grow at a
          pace more rapid than anything seen in recent mortgage
          history.  Banks and mortgage lenders throughout the
          United States are changing computer software and
          procedures to handle the new biweekly mortgage
          popularity.
               Due to the enormous acceptance or this type of
          mortgage, more and more banks and lenders are beginning
          to offer them as the word spreads.  And why not?
          
          
