Plus for Negative

Benny L. Kass’ Jan. 27 column seriously misinforms readers about adjustable-rate mortgages with a deferred interest option. He stated: “Under no circumstances can I recommend the negative amortization mortgage.” This is poor financial advice.

The best designed ARMs provide for the deferral of interest. The deferred-interest option is, perhaps, the most important consumer protection a well-designed ARM can offer because it helps the borrower to avoid payment shock. The alternative would be a sharp increase in the monthly payment. In some cases, borrowers might be forced to move or default.

Contrary to the myth that negative amortization is something bad, home loans with the deferred-interest option give most borrowers a better deal. Borrowers with the deferred-interest option will pay lower total mortgage payments, lower monthly payments and still build up substantial equity. They will not lose ground if their home appreciates as little as 3% or 4% per year.

KEVIN HAWKINS

Beverly Hills

Hawkins is assistant vice president public relations for Great Western Financial Corp.