Defending Negative Amortization Loans.

Mortgage and Lending with San Diego VA Home Loans/858-777-9751

I'm going to defend this product, well, a little bit. Roberta Murphy, one of my favorite hometown Active Rain Realtors posted a blog about neg am loans calling for stricter underwriting guidelines.  I essentially agree with her but want to explain a few finer points of neg am loans.

Firstly, let's start calling these products by their true names: either deferred interest loans or negative amortization loans.  Why am I being a stickler for that?  The "Option ARM" name was coined about 8-9 years ago by Washington Mutual in order to downplay the "negative connotations of the product's real description".  Countrywide called it the "PayOption ARM" and World Savings renamed it to the pick-a-payment loan.  Sounds nicer than "negative amorization" doesn't it?  Thank the marketing department of WaMu, World,  and Countrywide for that twist.



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Robert D. Ashby
Visual Approach Aerial Photography (Visual Approach Photography) - Plantation, FL
Turning Visions into Photographs (and Videos)
Very good on your explanation.  It seems you covered what people need to know.
Oct 01, 2006 02:25 PM #1
Geoff Lacey
I agree, the problems often come with the lender giving too much money with the loan.
Jan 19, 2007 01:26 AM #2
John Klassen
M & T Bank - Kingston, NY

How about Positve Principal Enhancement. There are no bad loan programs. Only improper application based on client circumstances. If the client think prime is always rising and long term rates should never go up...they shouldn't have one of these loans. PS, they als have limited savings and think CD's are the bomb.

Great post.

Jan 28, 2007 04:37 AM #3
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Brian Brady

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