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CBS Channel 5 up here in the Bay Area blows the cover off of some internal World Savings “Broker Training” videos that show brokers how to obfuscate and sell the Pick-a-Pay Option ARM to borrowers. You can view the training video here.
My favorite line?
“Most brokers refer to them as negative amortization, but we try to use the words a little more user friendly, ‘deferred interest.’”
I think this guy used ‘deferred interest’ don’t you?
But what concerns 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.”
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