Lender Offers $2B in Home Loan Refinancing to Mortgage Holders
Washington Mutual Inc., the largest U.S. savings and loan organization, has offered to refinance home loans - $2 billion worth of mortgages - at lower interest rates to help subprime borrowers meet rising payments.
Homeowners who anticipate higher mortgage payments on a Washington Mutual adjustable-rate subprime mortgage can apply for assistance, the Seattle-based thrift said Wednesday in a statement.
One of the options is a 30-year, fixed-rate home loan that charges half a percentage point of interest less than borrowers would otherwise pay.
Washington Mutual has about $20.4 billion in subprime loans on its books, or about 9 percent of the $217 billion loan portfolio.
Late payments on subprime (bad credit home loans) products reached a four-year, industry-wide high in 2006, the Mortgage Bankers Association reports, with foreclosure filings up 47 percent last month from a year earlier.
“Customers who work with us to develop a payment plan are more likely to succeed in avoiding foreclosure and balancing other household financial obligations,” David Schneider, president of Washington Mutual’s home loan group.
The program is available only to subprime mortgage customers whose payments are up to date. The mortgage company said it also has a group focused on helping borrowers who are behind on payments to keep their homes.
Shares of the company Wednesday gained the most since May 2004, rising $2.04, or 5.08 percent, to $42.17 in New York Stock Exchange composite trading. The stock has fallen about 5.1 percent in the past year.
This comes a day after news that first-quarter profits declined 20 percent as losses mounted on subprime Washington Mutual mortgage products.
At the same time, the home loan lender reported a better net interest margin, the difference between what it pays for deposits and what it charges for loans.
CEO Kerry Killinger said that WaMu was mainly hurt in the first fiscal quarter by “unprecedented deterioration in the subprime mortgage business,” according to remarks prepared for a conference call Wednesday.
The thrift reported a $113 million loss from the home loan group, mostly stemming from its subprime mortgage lending endeavors.
SOURCE: Seattle Post-Intelligencer