Please email me @ dbkarl1@gmail.com.

Thank you.

I work at World & so far it doesn’t seem like Wachovia is going to stop these. We have made some recent minor changes in guidelines, just to further improve our quality. we have always used the fully index rate to qualify. The amount of training I have recieved to sell PicAPay is enormous.

I am trained to engage my borrower in a dialogue to get a full picture & help them see a full finacial picture of themselves.

I do a weekly presentation at RE/Broker offices using the 1003 as mirror to reflect a borrower’s finacial picture combined with a credit report. I am amazed to see how many top producing LO’s and RE Agents have no clue of what 1003 is meant to be.
At World they train us well to scrubb the loans for better quality. We are trained so well and we love our company so much that we do not bring home the bad eggs, because we know that we are portfolio & it will come to bite us.
No wonder we have the lowest default ratio in this market.

When a broker throw a bad file at me I simply tell him, sorry wrong file I am World not CW & the broker/lo will tell me all about why this is a good loan, and then tell me that he will not send me any more business, and I still tell him no, and then they start talking about the next file.

One most important thing unlike CW & others we never did an Option ARM for 100% CLTV, and since our negam is 125% most other lenders dont take a second behind us. Thus for the number of defaults we currently have, we can sell them and take minimal losses as we still have a little more room to play with the LTV.

We are glad to see the Sub-Crime lenders go out of business. And if you are wondering I have trippled my volume in last 6 months. And yes we are hiring GOOD LO’s so let me know.

In my estimation, ABC had the best products and service. Bar none. They were kicking everyones butt, including the folks that were lending them money to fund their loans. They were #10 amongst all lenders when they were “taken out” by their competition [creditors]. Sure the creditors say it was because of bad loans but if you look at their financials [available on their web site]it doesn’t appear that they had an unusual amount of defaults. The average credit score appears to be in the 710+ range. I think the creditors simply took advantage of hoopla surrounding the [real problem] of the sub prime market, seeing the opportunity to take out a major competitor by yanking their credit lines.

Does anyone out there have the same or differing opinion…That can hopefully be backed up by real data?

In March, 2004, {I was a 16 yr. public school teacher at the time}and I was thinking of refinancing my house for debt consolidation when the phone rang…It was a cold call from a broker…As he explained the Option ARM to me the financial cogs in my brain started churning. I thought, “WOW! I can do a debt consolidation with this loan product and by comparison to a 30 year fixed rate loan, I can have a mortgage payment that is 55% less. AND!!!! The real ICING ON THE CAKE is that my credit report will reflect having paid off my consumer debt and the MINIMUM payment will show as my mortgage payment which will allow me to LEVERAGE myself to buy investment property….because my DTI will be considerably lower. I hung up the phone, did my own research on the internet and found a better product than the cold caller’s. And I bought investment property.

Now here’s the real crux of the story: The 20 year ‘veteran’ broker I used to refi my house to the Option Arm didn’t know the product…I had to teach it to him. I ended up selling that house b/c I had $200,000 in equity to put to work. [Yes,[in hindsight], I should have just sold the house after learning of the Option Arm and used the product for my new purchase…Live and learn.]

So, I sold my house, moved out, and moved in with my parents while my new house was being completed. I instructed this same joker broker that I wanted a 125% neg am cap, 7.5% yearly payment increase, margin no higher than 2.5% and NO PRE-PAYMENT PENALTY! The [initial] TIL is marked “No PRE-PAYMENT PENALTY”.

BUT! I get to the closing table and what do I have? A 115% neg am cap, 2.575% margin and a 3 year pre-payment penalty. The slimy bastard new he had me by the balls…

I closed.

And learned a valuable lesson.

My [mild] fear is that the very conservative minded Wachovia kills the loan altogether or implements changes to kill the loan. I don’t think it will happen though…As you stated World is very sensible in their underwriting…There default % is very low. With their [present] terms everyone can win. A worse fear is that Big Brother steps in…

As you iterated, the loan is for educated perhaps sophisticated borrowers. I do contend though, that it is the LO’s job to provide the education. Unfortunately, there are way too many ignorant, irresponsible, lazy LO’s out there that put the wrong people and properties into this loan type. I have had folks owning multiple investment properties [into the teens] that ‘got it’ when the loan was broken down to them.

I’m an x-teacher so I teach. Many LO’s are pure salesman. I can only imagine that many LO’s couldn’t explained what a margin is, couldn’t explain what the COSI, CODI, COFI, MTA and LIBOR indeces are tied to and how they have historically performed. On and on…just sickening.

And many don’t know real estate.

I don’t really think you or anyone who truely understands the virtues of the Option ARM want to see it go away.

Many neg ams do need to go away…but the 125%, 7.5% yearly payment increase, 10 year recast w/ reasonable margins can be utilized to the benefit of many.

“Perhaps unbeknownst to many of you out there, the Option ARM has been around for over 30 years. You read that correctly. And the [portfolio] lender that started the Option ARM is still in business, still offering [the best] Option ARM. They are World Savings [Wachovia]. If anyone is using anybody else for the Option ARM they are ripping off their borrowers. That is unless you can beat a 125% neg am cap, reasonable margins [w/ good YSP], and a 10 year recast.
I just priced the highest margin for a $240,000, cash-out refinance on a primary residence, paying 3%YSP. The margin is 3.15%. The Wachovia COSI Index is at 4.9% and forecasted to be going down for the next several years.”

I started my career as a wholesale rep for World Savings. The loan limits, start rates, recast period, margins, prepays and YSP have always been very fair and designed to keep the consumer out of trouble. Even so, these loans are for educated, if not sophisticated, borrowers.

But as Countrywide began pushing the 1% start rate and the 5 year, fixed payment versions, things got totally out of control. And tie this to the Libor index? You have to be fricking kidding me. That’s the worst loan ever invented. Pay at 1%, owe at 9% fully indexed with a 115% loan limit and you run out of fixed payment after 20 months and your payment triples. How that was never made illegal is beyond imagination.

So Morgan, maybe it is good riddance. I hate to lose a valuable financial planning tool like this, but if we can’t control our drinking, maybe it’s better not to keep alcohol in the house.

edited by morgan per Marc’s request.