Wachovia Ends Pay-What-You-Want Mortgages

In a rare indication that there may be some reasonably intelligent executives running things at America's top banks, Wachovia Corp. (NYSE: WB) has decided that it will stop offering a mortgage that allows customers to pay less each month than the bank charges in interest.

Hold on. What? The "Pick-a-Payment" mortgages allowed borrowers to choose one of four payment options each month -- as in, "Do you want to pay off your mortgage or do you want to buy a new television and every season of Golden Girls on DVD?"

You can probably guess which option many people chose.

Read the whole story here.

Comments

[deepintheheartoftejas]

Ok, I read the article... I don't see what's deadly about it, though. Was there some reason Huffington Post headline writers stuck in that adjective?

[ibsteve2u]

You didn't read the line that contained "...and leaving the bank with a hefty loss in the event of foreclosure."?

Such practices are deadly - to the bank...and then when it crumbles, to people's savings that are invested in the stock market, etc.

[letsgetsmart]

Your running on wrong info. The majority of these types of loans are not held by banks. Also this is one of the few loans of any type that is booked in a very conservative equity position. There will be more foreclosures in the A paper ranks from divorce and death in the family then from default of this type of loan.

[letsgetsmart]

This type of loan product is sold about 95% of the time to A borrowers who have equity left over and the means to refi any time they want. This loan is not the cause of the mortgage problems. It is the sub prime two year fixed first mortgage partnered up with a second mortgage that allows people with poorer credit and less income to buy a home with no down payment. Fan Mae and Freddy Mac pretty much dictate how A paper is put on the books and the republicans have been going after them for a decade now. The only place wealthy republicans can play is in the sub prime markets and they need a lot of failures to be able to pick up cheap properties to make a big profit. Just about all of the cases of fraudulent applications happens in sub prime because A borrowers do not have to document income with high credit scores. On many A product applications the income is left blank. In spite of what the republicans say Fan Mae and Freddy Mac are highly regulated because of where the money comes from that is used to fund the loans.

[rh654]

So who didn't see some of these options as a disaster waiting to happen?

Well - except for the Execs making millions that is....

[iambusto]

Nobody put a gun to their head to take those loans or lie on their application.

similarly, you cant blame a bank for giving bad loans out (unless you are a shareholder). if the bank wants to engage in a money-losing practice they can do that cant they?

[AmericanSinceFeb08]

They can, unless it becomes a risk to the whole economy (raising inflation, foreclosure, higher unemployment). We can not continue to be sleeping at the wheel (GWB). Stupid is not illegal, but regulation would have prevented the sub-prime mess we ended up with. It was all over the news (if you wanted to read it), but this admininstration decided not to regulate and monitor. (the banking committee was chaired by Mr. Phll Gramm, now a McCain adviser, want more of the same???)

[realityczech4u]

You can blame a bank if you're a taxpayer because the FDIC insures accounts up to $100,000. So if the bank goes under due to the fraudulent and/or irresponsible schemes and scams of it's management, the taxpayers are left holding the bag. The FDIC, as well, can 'blame' the bank for failing to engage in prudent lending practices, which are a requirement of being covered by FDIC insurance.

As to loan applicants, lying on their loan applications is known as "fraud". It is a crime. They should be prosecuted. Nobody put a gun to their head and nobody should bail them out when they default.

[heal57]

You lack compassion; the lendersknew darn well some borrowers could not afford their loans but they wrote them up anyway for their commissions. People tend to blame the victims. You actually think someone should go to prison because he or she upped their income on the application. You should work in the Bush administration; preferably under Cheney.

[iambusto]

very good point there reality. i actually agree with you on the FDIC point.

but i have a question. might sound silly so bear with me a min.

What if the banks genuinely believed that they will be able to generate revenues through fees and be able to securitize the mortgage and hence wont have the loans in the books except a certain portion if there is a squeeze (as in exactly the situation now).

is that still a fraud (in part of bank)?

[KillTheMessenger]

You get what you pay for. If you never pay the principal, eventually you get a foreclosure.

[DRaymond]

I am surprised that they hadn't cut it out as soon as the crap hit the fan.

[Sundialsvc4]

Whatever happened to "fiduciary duty?"

[realityczech4u]

That's what I've been wondering. Where the hell is the FDIC? Are there still such things as 'bank examiners'? The FBI marched a few Bear Stearns execs before the news a few weeks ago. It would take a few new prisons to house all the crooks who were involved in these scams.

[WFV]

Duh. I could not believe the commercials for these loans when they were introduced. To me, these loans are a recipe for disaster for the borrower, allowing them to rack up more debt.

[RobertaInCT]

It's really hard to believe that so many were taken in.