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Wednesday, May 21, 2008

World Savings Option ARM Training Video

by Tanta on 5/21/2008 11:56:00 AM

Channel 5 in San Francisco got its hands on some "training videos" used by World Savings--now owned by Wachovia--to teach brokers and loan officers how to originate their "Pick-A-Payment" negative amortization ARM. It's pretty disgusting:

But what concerns [housing advocate Maeve Elise] Brown even more was the way World Savings employees were instructed to answer questions about the minimum payment on those option ARM's.

"So if I'm paying that minimum payment, I'm not actually putting a dent in my principal though right? My principal and interest they're just going to keep climbing up right?" the borrower asks in the video tape. "It's optional," the broker in the video replied.

"What kind of answer is that?" said Brown after watching the video. "The answer would really be 'Yes.' That's the right answer, that to me would be the true clear straightforward truthful simple answer."

And in still another scenario, the video instructs brokers to explain those loans. "Why would I offer a loan that has a negative amortization?" the broker asked. The World Savings representative replied: "Most brokers refer to them as negative amortization, but we try to use the words a little more user friendly, 'deferred interest.'"
Unfortunately, I don't think very many borrowers probably asked that minimum-payment question. To think that those few who did would be fobbed off with the comment "it's optional" is nausea-inducing. It also strongly suggests, of course, that borrowers who didn't ask that question didn't find the brokers volunteering the information that making the minimum payment would increase the balance.

(Hat tip to checker!)