Wachovia Corp., which ousted its top executive after estimating it may lose more than $4.5 billion on adjustable-rate home loans, will start calling would-be borrowers to explain the risks of such mortgages.
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(Bloomberg) -- Wachovia is contacting applicants through independent mortgage brokers to ensure "the customer understands the key features of the Pick-A-Payment loan product," according to a June 11 memo from Tim Wilson, head of loan origination at the Charlotte, North Carolina-based company. The loans let borrowers defer part of their monthly bills. Wachovia and lenders including Countrywide Financial Corp. and Washington Mutual Inc. have been burned by delinquent option adjustable-rate mortgages, often called option-ARMs. Wachovia is led by interim Chief Executive Officer Lanty Smith who replaced Kennedy Thompson on June 2, two years after the bank's $24 billion purchase of Golden West Financial Corp. at the peak of the housing boom. "Stepping so much into the underwriting process is very unusual and almost unprecedented," said consultant David Lykken of Mortgage Banking Solutions in Austin, Texas. "My sense is that to appease the federal regulators they are saying we will do this extra kind of due diligence."
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