ENGLEWOOD, N.J. - Freddie Mac, First Financial Equities, and several other lenders have teamed up with the Pacific Housing and Finance Agency of San Pedro, Calif., to provide 1% down-payment mortgages for lower- and middle-income California families.

The mortgages are part of a two-year program started in January to help borrowers who can make monthly payments but cannot come up with a large down payment.

The borrower's household income must be between $35,000 and $77,500. The maximum loan amount is $252,700.

The loans are funded by the housing agency, which issues bonds to cover the purchase price of the house and related expenses. Freddie then buys the loans from the agency.

The borrower leases the house from the agency for 38 months, then assumes the balance of the mortgage payments if he/she decides to buy the house. The lease payments are equal to 30-year mortgage payments at a subsidized interest rate, First Financial said.

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