Wachovia announces today that they are pulling there Neg-am loans off of the market.
What is a neg-am loan? These loans were made to people who desire more payment flexibility.
The payment options are:
1.) Pay half the of the monthly interest payment on the loan. The other half of the interest is deferred back to the principle.
2.) Interest only payment. Only the interest that is due on the loan. Uses a 30 year amortization schedule.
3.) Principle and interest payment, like a traditional 30 year mortgage payment
4.) 15 year payment. This is based off a 15 year amortization schedule.
The real tricky thing about these loans is that they are based on a floating index, meaning that interest rates are always adjustable. YIKES!!
I think the problem is not that these are bad loans, they have been used for 25 years, but they were made to the wrong type of people the past few years. If you are deferring your interest that is due on your home and its deprecating then it’s a lose-lose scenario. It looks like Wachovia finally woke up and decided that enough was enough.
What is a neg-am loan? These loans were made to people who desire more payment flexibility.
The payment options are:
1.) Pay half the of the monthly interest payment on the loan. The other half of the interest is deferred back to the principle.
2.) Interest only payment. Only the interest that is due on the loan. Uses a 30 year amortization schedule.
3.) Principle and interest payment, like a traditional 30 year mortgage payment
4.) 15 year payment. This is based off a 15 year amortization schedule.
The real tricky thing about these loans is that they are based on a floating index, meaning that interest rates are always adjustable. YIKES!!
I think the problem is not that these are bad loans, they have been used for 25 years, but they were made to the wrong type of people the past few years. If you are deferring your interest that is due on your home and its deprecating then it’s a lose-lose scenario. It looks like Wachovia finally woke up and decided that enough was enough.
Article:
http://www.marketwatch.com/news/story/wachovia-halts-mortgages-negative-amortization/story.aspx?guid=%7B4FB9EE95%2D6B1E%2D4F8D%2DA785%2DB989525C9641%7D&dist=msr_2