Wachovia Corp. announced yesterday that they would stop offering negative amortization mortgages.Their negative amortization mortgage was called Pick-A-Payment because it gave borrowers 4 different payment options each month.  A negative amortization mortgage is a mortgage that you are allowed to make payments for less than the amount of interest that is due. The interest that is not paid in full each month is added to the mortgage's principal balance.

Wachovia's Pick-A-Payment mortgage gave borrowers the following options each month:

  1. Paying the fully amortized 30 yr Fixed principal and interest payment. Making this monthly payment will pay off your mortgage in 30 yrs.
  2. Paying the fully amortized 15 yr Fixed principal and interest payment. Making this monthly payment will pay your mortgage off in 15 yrs.
  3. Interest only payment. Paying only the interest that is due on the mortgage. Nothing is paid toward the principal so your principal balance remains the same.
  4. Making the mininum payment due which does not cover any principal and doesn't cover the full interest payment due on the mortgage. The interest that is not paid is added to the principal balance on the mortgage.

Wachovia's Pick-A-Payment became very popular during the recent real estate boom when alot of people were investing in real estate and didn't care about paying down the mortgage because property values were increasing so fast that it didn't matter if they paid anything toward the principal.

I think that this is a very wise move on Wachovia's part and I'm surprised that they didn't do it sooner but they have really just taken over World Savings, which is the company that was marketing the Pick-A-Payment mortgage.

Have a Great Day,

Sandra Sheely