Wachovia Tightens Guidelines

It is interesting to see that Wachovia just tightened its guidelines on its, “pick a payment” loans. This is especially interesting to me, because at the beginning of the year we had a presentation at our office from a World Savings executive that touted the flexibility of this loan. My opinion is well reverberated in Mike Mueller’s recent post on the Lenderama blog.

“Seriously, The Neg Am loan has a very valuable place in the finance world when properly used.  I believe Wachovia (world Savings) had the highest performing Neg Am Portfolio in the biz.”

These mortgage products do have there place in the financial world. I also agree with the executive that visited our office at the beginning of the year. These products are useful and powerful for the right individual situation. Maybe, the changes in Wachovia’s policy have more to do with their own business concerns and buying Golden West mortgage, then with the validity of the product that was successful for Word Savings for so many years. Just check out this CNN Money story that illustrates how 3.8% of Golden West’s pool of pick a payment mortgages went belly up after Wachovia purchased them in 2006.

The answer is that there are no bad loans in the marketplace. Loans are not people thus they can’t act good or evil. Mortgages are either placed by a person with the strategic knowledge to effectively care for an individual’s entire financial situation or they are not. I have many clients who have taken World Savings pick a payment loans and they have met their financial strategies without causing any despair or foreclosures.

I think the conversation in the marketplace needs to change from the loan product, to who is doing your loan. Are they competent to take care of your mortgage concerns with out betraying the other financial concerns that you have? Many banks and brokers have done mortgages with a blind eye to the customers financial situations and concerns. Often, you can’t even blame the person doing the loan, because they are not even competent to take care of their own financial concerns, let alone yours. Maybe contracting guidelines is not the answer for banks. Maybe, they should start to think about how they operate in regards to the knowledge of the people they have doing the loans. Maybe if they observed, assessed and acted to care for a clients mortgage in the context of their total financial situation they would have a huge stack of loans that could sell on Wall Street as mortgage backed securities. Warren Buffet eloquently explained the breakdown in the mortgage markets when he said, “In extreme cases, mark-to-market degenerates into what I would call mark-to-myth.”

Thanks Ocean Flynn for this flicker Photo.