Comments on: Wachovia to Borrower- “Are You Sure You Understand the Pay Option ARM?”

By: Downey Savings C-ds

Downey Savings C-ds — Fri, 20 Jun 2008 11:06:39 +0000

Howdy Guru, I fell lucky that I located this post while browsing for downey savings c-ds. I am with you on the topic . Ironically, I was just putting a lot of thought into this last Friday.

By: Out at the Peak

Out at the Peak — Fri, 20 Jun 2008 01:38:59 +0000

PAP may not be the main problem, but it certainly is for some borrowers. Some borrowers were tricked into thinking they could pay the minimum payment forever. All PAP borrowers that I’ve come across were qualified with income that could only cover the minimum payments. Once they hit the neg-am reset, they could not afford the new payment, get a refi or sell without a short sell.

(Sure, if house prices kept going up, the borrowers would still have options.)

By: North Carolina Foreclosures » Blog Archive » Wachovia to Borrower- “Are You Sure You Understand the Pay Option …

Fri, 20 Jun 2008 00:28:23 +0000

[...] admin wrote an interesting post today onHere’s a quick excerpt [...]

By: admin

admin — Thu, 19 Jun 2008 02:32:20 +0000

Hi Pot – What’s up. You are totally right. We went over other forms of industry screws ups in the link below. The Pay Option was one of many things but in my opinion as far as toxic loan programs are concerned, this one takes the cake and Wach was out there selling it with fancy commercials until 30-days ago. Gimme a break.

http://mrmortgage.ml-implode.com/2008/06/13/mr-mortgage-friends-of-angelo-didnt-get-anything-that-special/

By: Nicholas

Nicholas — Thu, 19 Jun 2008 02:17:22 +0000

Hi Pot, I’m Kettle. Any one of you that thinks that the Pick-A-Pay loan is the reason for the mess we’re in you couldn’t be further from the truth. Does anybody in here really think a 30 year fixed (with all the principal reduction up front) is going to help people build equity??? Seriously? Oh and when you’re upside down in your home I can see why being committed to a higher payment is better for the customer than a smaller one giving them the option to keep and invest that money rather than throw it away. Dave, good call on the 3 point rebate. By the way, I’m sure you never sold an Option ARM to ABC (or other lenders) offering 4+ points. And I’m doubly sure that nobody else in the room was telling their Wachovia AE’s that 3 points “wasn’t enough” when they could make more elsewhere. Please. Should we start on the “pushed appraisal” subject? You want to point a finger and you can start with the stated income, 580 credit score transactions with the 3 highest sales in the neighborhood used as comps. No, that never happened. If the mirror was in front of the industry everyone would admit that pushed appraisals were the norm rather than the exception. And you are worried about the Pick-A-Pay loan pushing someone into negative equity? Let me tell you, a pushed appraisal did it by the tens of thousands when the Pick-A-Pay does it hundreds at a time. I especially love the “Heartbeat Lender” comment. This coming from an industry that was willing to lend stated income, stated assets to a borrower with a 580 credit score at 100% financing, asking them to put no skin in the game when all they’ve ever told you is that they’ll never pay you back. And, in most cases, that 100% was really 120% from the start. How much of the industry was high LTV, low score sub-prime? I’m sure a whole heck of a lot more than PAP. Anyone still convinced that PAP is really the problem?

Everyone has a share in what happened so stop pointing the fingers. Look yourselves in the mirror and be accountable for any role you played in it. Lenders, brokers, investors, Wall Street, bond rating companies, etc. Did I leave out the realtors finding “comps” to make sales prices work? How about the consumer that told the broker they wanted this way or they’re going somewhere else to get it that way? And by the way, ethical or not, if you didn’t do it, the broker down the street did. Get off the bandwagon and into reality. Has Wachovia’s REO risen this year? Of course, it had nowhere to go but up since it was 0 for the previous 5 years. How many lenders can say that? This is not a PAP problem, it’s an industry problem. Grow up and treat it like one.

By: a Japanese investor

a Japanese investor — Thu, 19 Jun 2008 01:31:31 +0000

According to GAAP, banks can count the highest amount of an option ARM payment as their revenue, no matter how much money borrowers pay. I’m not sure Wachovia is doing this, however, Wachovia could make huge phantom profits from Pick Your Poop loan…

By: a Japanese investor

a Japanese investor — Thu, 19 Jun 2008 01:21:12 +0000

I heard that American people can’t do the math, but I never imagined there were such many idiots…

By: karen

karen — Thu, 19 Jun 2008 01:08:01 +0000

dear Mr. Mortgage – thank you for your extremely helpful site. re being slammed: readers can tell by the tone, literacy level and motivations of slammers, whom to believe. please keep up the good work (and stay healthy!).

By: Bill

Bill — Thu, 19 Jun 2008 01:00:49 +0000

Two days ago closed my “High Performance Money Market” at Wachovia and transferred the funds to my local credit union down the street for 3 times more interest (2.65%). For a $50,000 balance Wachovia was paying a generous .9% rate…I guess they wanted me to pay for future losses from these option arms. Today they approached me on opening a new Money Market Fund paying 3% for 90 days. Based on what I just read, I would like to thank Mr. Mortgage for helping make the decision of not taking the bait and switching back.

By: Matt

Matt — Wed, 18 Jun 2008 20:35:50 +0000

OK, so here’s my question:

WHY is Wachovia calling? Because, now that they realize what the market’s doing, they’re not stupid (or, as stupid as they were). You call these folks now in the hopes that some of them start paying down principal (or, at least make interest-only payments). Why? Wachovia would rather have these folks paying some money over the long term than take possession of a worthless asset! Wachovia doesn’t want to foreclose now, and they really don’t want to foreclose in a year or two. They’d much rather have a regular old functioning loan out there than a house they can’t sell (or have to take a major loss on selling). If they can somehow keep 5% more of these folks in their homes, that’s a lot of houses they aren’t going to have to lose their shirt on.

Am I wrong?