Option ARM loans aren’t all bad

Problem was too many borrowers exploited minimum payments

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The memory of a no-nonsense conversation, held more than a decade ago, hit home then and is vivid today. "This probably would not be the loan for a person who planned on making just the minimum payment every month," said the Washington Mutual senior loan consultant. "It's a great program for borrowers who really might use the flexible payments, but if you stay with the minimum, you are absolutely going to owe more than you borrow." I thought about that meeting the other day when I read that WaMu had discontinued its option-ARM (adjustable-rate mortgage) loan program along with its Mortgage Plus loans -- and laid off 1,100 more employees. Earlier this year, the bank had closed its home loan centers, sending potential residential mortgage applicants to its retail banking outlets. The reason WaMu pulled the mortgage programs was the national scrutiny toward any negative-amortization loans. Negative amortization occurs when the monthly loan payment is less...