HEINDRICK SO

Effective immediately, Wachovia has issued an announcement that they are waiving all prepayment penalities on their “Option Arm” or “Pick-a-Payment” mortgages. Here is the full email sent by a Wachovia Representative,

“Wachovia is very committed to serving our customers and ensuring they have not only the right product to meet their needs, but also the resources available to help them during these difficult times. As a result, we have decided to take a number of proactive steps to help our customers deal with a challenging economy and declining housing environment.

Effective immediately, Wachovia is waiving all prepayment fees associated with its Pick-A-Pay mortgage to allow customers complete flexibility in their home financing decisions.  This includes all Pick-A-Pay mortgages on 1-4 unit residences.

Additionally, on all new originations Wachovia is discontinuing offering the option on any mortgage product that would allow a customer to go into negative amortization.

Proactively waiving prepayment fees and eliminating the negative amortization option on our Pick-A-Pay products gives our customers the freedom to manage their current financial situation more effectively.

Wachovia will continue to offer a variety of portfolio, marketable and government products through our Wholesale (third party) brokers and in order to accommodate customer needs.”

This is great news for those who were once “locked” into a loan by these hefty penalties. A typical penalty would usually incur anywhere from 1.5%-2% of the loan amount, resulting in penalties ranging from as little as a few thousand to some breaking the $20,000 mark. Although the rates on these types of loans have been slowly backing down, this news gives Wachovia clients a bit more breathing room if they want to see what else may be available to them in the market.

Additionaly, for you non-Wachovia clients – keep a close eye on your lender’s policy or speak with your mortgage planner for more infromation. Typically, lenders like to stay competitive and if Wachovia is dropping their preparyment penalties, it would not be out of the question for others to follow suit.

This economy has truly put the hurt on some of the big names in the industry – when Wachovia has to drop these carefully calculated penalties to avoid a further increase of foreclosures and bank owned properties, theres obviously some convincing numbers in their accounting books.

Bottom line, banks are not in the business of owning homes – and this was Wachovia’s way of making sure they are not stuck with any more than they have to be.

For more info feel free to contact me [here]