Alternative Mortgage Instruments: Authorizing and Implementing Price Level Adjusted Mortgages

Of the institutions authorized to make mortgage funds available, only federally-chartered and a small minority of state-chartered savings and loan associations are presently authorized to make PLAM loans. This is due, in part, to a variety of legal and underwriting problems that may outweigh the theoretical advantages of PLAM financing. This Note evaluates these legal and underwriting problems and proposes legal measures to accommodate PLAM financing. Part I discusses the development and advantages of the PLAM. Part II analyzes the legal and practical underwriting objections to PLAM financing, including interest regulations, tax ramifications, and commercial desirability. Part II also suggests reform in various state banking statutes and lending practices to enhance the attractiveness and feasibility of this new mortgage instrument. This Note concludes that authorization of price level adjusted mortgages would be an important addition to the present array of mortgage financing instruments.