Wachovia to Borrower- “Are You Sure You Understand the Pay Option ARM?”

"Once the borrower gets a hard-recast letter saying “you have reached your maximum allowable negative amortization for this loan program, so now you must either a) refinance b) pay a minimum of interest only payments so as not to accrue any more negative amortization (this could double the payment)”, borrowers will default. First, you can’t refi in most cases. Second, why in the world would you want to pay twice the monthly payment for a home that has dropped 30% in value and where you have accrued 15 to 25% negative amortization depending on the lender? By the time they get this letter, a borrower could be upside down 50%!"