Wachovia Dumps 'Neg-Am' Option

Wachovia Corp., Charlotte, N.C., the nation's largest payment-option adjustable-rate mortgage lender, said Monday that it would no longer offer the "negative amortization" option on the controversial loans. In the fourth quarter, Wachovia funded $5.5 billion in option ARMs, according to the Quarterly Data Report, a 44% decline from the level of a year earlier. Option ARMs have been heavily criticized for fueling the housing boom because they offer homeowners four different payment options each month, including "negative amortization," in which the borrower adds to the debt owed but gets a cheaper monthly payment. Option ARMs were a staple product for World Savings of Oakland, Calif., which Wachovia bought two years ago. Wachovia owns about $120 billion in option ARMs. Wachovia recently said it had hired Goldman Sachs & Co. to analyze its loan portfolio.