Washington Mutual offers new all-in-one mortgage, home equity loan
Thursday, April 26, 2007 7:48 AM PDT
By Associated Press
Printable version
E-mail this articleSEATTLE (AP) -- Washington Mutual Inc. has begun offering a new mortgage and home equity line of credit bundled into a single loan that allows customers to reset interest rates or switch between fixed and adjustable rates up to twice a year without having to refinance.
The Seattle-based thrift said WaMu Mortgage Plus is designed to help consumers take advantage of changes in their financial needs or market conditions without having to bother with mounds of refinancing paperwork or steep fees.
"We constructed this product with an eye toward what we think is a very large group of customers that are looking for more control and flexibility," Steve Rotella, Washington Mutual's president and chief operating officer, told The Associated Press.
Washington Mutual, the country's largest savings and loan, began offering WaMu Mortgage Plus in mid-March and is kicking off a nationwide marketing push Thursday.
The company will charge customers $250 each time they reset terms of their mortgage-home equity loan, up to twice a year, though the first reset will be free. It won't cost anything to switch from a fixed rate -- generally viewed as the safer option -- to an adjustable rate.
Borrowers have to put 10 percent down, but Washington Mutual charges no origination fees and waives various other costs home buyers typically pay, such as appraisal and title fees.
Once borrowers begin paying down their mortgage, they'll be able to tap into their equity with a check, cash advance or, in most states, a credit card. That line of credit will grow as they pay down their mortgage.
By giving customers a simpler way to get cash for remodeling projects, college tuition and the like, Rotella said he hopes Washington Mutual will hang onto customers who might otherwise refinance with another lender.
Rotella acknowledged that some banks offer products with similar features, but predicted that Washington Mutual "will grab market share from our competitors" because it's the only one offering the features as an all-in-one package.
WaMu Mortgage Plus is not available to subprime consumers, those who pay higher interest rates because of sketchy credit histories or low income.
Customers who get the new loan can, however, choose between the conventional method of paying both interest and the principal mortgage balance or making interest-only payments.
Interest-only and other nontraditional mortgages became popular a few years ago as borrowers were eager to snap up low interest rates when the housing market was hot. But interest rates have risen in recent years, and the housing market has sagged, which has saddled many of those customers with mortgages they struggle to pay.
Despite the greater risk, Rotella said Washington Mutual believes interest-only loans remain a sound option for many customers. "As long as we make sure as best we can that people are aware of the options, they're given good disclosures, they're given the right advice ... generally they're going to make the right choice," Rotella said.
Washington Mutual's home loan group has suffered amid a stumbling housing market, losing more than $250 million in the past three fiscal quarters.
The company places much of the blame on rising delinquencies and defaults among subprime borrowers. It has reined in its subprime business, and expects an improving economy and strength in prime lending -- including its latest offering -- to boost the home loan unit back to profitability.
"As the home loans organization continues to improve, this is just going to accelerate the momentum we believe we're building in that business," Rotella said.
Without disclosing how many customers have signed up for WaMu Mortgage Plus since it was first offered, Rotella said the company is pleased so far. "It's been above our early expectations by a fair amount," he said.
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On the Net:
Washington Mutual: http://www.wamu.com/.
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