Wachovia Corp. is steering away from mortgage programs that result in negative amortization and waiving prepayment penalties for borrowers who want out of some risky programs.
The Charlotte, N.C.-based company said today it would immediately begin waiving prepayment penalties on pick-a-pay mortgages secured by 1- to 4-unit properties.
In addition, Wachovia said it would no longer offer loans with payment options that result in negative amortization.
The steps are being taken "to help its mortgage customers deal with a challenging economy and declining home values."
Wachovia noted that it has modified payments for around 18,000 borrowers during the past 12 months "to provide mortgage relief to help them avoid foreclosure."
The move represents an about face for the company, which just last year had been aggressively growing its option- adjustable-rate mortgage originations. Option ARMs had been a mainstay of World Savings, which was acquired by Wachovia in October 2006.
"Proactively waiving prepayment fees for our pick-a-payment mortgage products gives our customers the freedom to manage their current financial situation more effectively," Wachovia Mortgage President David Pope said in today's statement.
The lender added that it would continue to offer a variety of portfolio, conforming and government loan programs through direct, wholesale and Internet channels.