Wachovia no longer offers Payment Option Arms

Wachovia Corp., the nation's largest payment-option adjustable-rate mortgage lender, said Monday that it would no longer offer the "negative amortization" option on the controversial loans.

In the fourth quarter, Wachovia funded $5.5 billion in option ARMs, according to the Quarterly Data Report, a 44% decline from the level of a year earlier. Option ARMs have been heavily criticized for fueling the housing boom because they offer homeowners four different payment options each month, including "negative amortization," in which the borrower adds to the debt owed but gets a cheaper monthly payment.

Option ARMs were a staple product for World Savings, which Wachovia bought two years ago. Wachovia owns about $120 billion in option ARMs.

I find this funny because any time you call World Savings for a product this really is the only product my Account Rep would push.

Payment option arms have not really made sense for years on most scenarios. They were a great product for an investor who was keeping an appreciating property for short term. But with the decliningmarket in our area, they just don't make sense. Bottom line there was a time where it was the only product many mortgage "professionals" were pushing but there was no long term thought behind the mortgage strategy. I can't tell you the last time I placed a client in this type of loan. These loans only really work for a very special set of circumstances and one of which is NOT I can't afford the payment right now!.

This blog written by:
Team Newington
Sacramento Mortgage Planners
(916) 687-6868
www.SuperiorLoanTeam.com