Juicy Estates: Mortgage Blog

Archive for November, 2009

Wells Fargo Kicks The Can Down The Road

With the acquisition of Wachovia Wells Fargo acquired one of the largest portfolios of Option ARMs, sometimes known as Pick-A-Pay loans.  These loans offer 4 payment options one of which is not enough to cover the interest due each month and are thus termed “differed interest loans”.   Most Option ARMs are tied to indexes that have remained artifically low masking what could be another massive wave of foreclosures.  This wave on the horizon is referred to as the “Alt-A” bomb.

Thousands of homes in South Florida were purchased or refinanced using Option ARMs.  As mentioned in a recent article in Realtor Magazine Wells Fargo started proactively reaching out to those former Wachovia clients that have Option ARM’s and is offering to modify the notes to more traditional interest only mortgages and differ balances for as much as 10 years.

While this is not the ideal fix for the problem I applaud Wells Fargo’s effort to address the issue before it becomes another mortgage sunami.