Once upon a time, lenders saw a land full of desperate buyers and then came up with many new ways to offer them home loans that had reasonable monthly payments and then collect on the mountain of interest that would eventually pile up. In the end, a mortgage crisis swept through the land. Now, lenders like Wachovia and Washington Mutual are backing off.
Wachovia can blame their acquisition of Golden West Financial Corp for some of its recent failure. Pick-A-Pay was a program that allowed Wachovia borrowers to choose from a handful of adjustable-rate mortgages. The program has led to many foreclosures, 60% of which are in California where Golden West is based.
So what are Wachovia and WaMu doing about all of this? Well, Washington Mutual is putting the Kibosh on all of its negative-amortizing loans. These are loans in which the interest continues to increase over time because the monthly payments do nothing to decrease interest. So, what's Wachovia doing? Well, they have a bevy of programs set up to help mortgage customers stay in their homes. They've already helped about 18,000 customers to date. Beyond that they are waving all prepayment fees related to their Pick-A-Pay program.
Maybe now some borrowers will get a little relief in the midst of a difficult economy.