Wednesday, May 22, 2007
Yara Zakharia, Esq.
Washington Mutual recently unveiled WaMu Mortgage Plus, an "all-in-one" loan package combining a home equity line of credit and new mortgage that offers consumers the opportunity to alternate between adjustable and fixed rates twice annually and to reset interest rates without refinancing. Customers can utilize a WaMu Mortgage Plus as their principal mortgage and eliminate any existing mortgage debt they have.
This new Washington Mutual mortgage product, which was introduced in mid-March and is now the subject of a national marketing campaign, is aimed at helping clients capitalize on market conditions and changing personal financial needs without being burdened with high fees and a load of refinancing paperwork.
Washington Mutual's Chief Operating Officer and President Steve Rotella explained that Mortgage Plus was conceived "with an eye toward what we think is a very large group of customers ... looking for more control and flexibility".
The first reset of a home equity-mortgage loan is free of charge; subsequent resets cost $250 each. There is no charge for changing from a fixed rate to an adjustable rate; the former usually deemed the more secure option.
Although home buyers are expected to make a 10% down payment, Washington Mutual does not require payment of such costs as origination, title and appraisal fees that borrowers commonly pay. Once home buyers start paying down the principal on their WaMu Mortgage Plus, they will be entitled to tap into the equity they built by using a cash advance, a check, or in the majority of states, a credit card. With each mortgage payment they make, customers will see their line of credit growing.
Rotella considers that this easier method for borrowers to obtain cash for such expenditures as college tuition and home renovation projects will enable Washington Mutual to retain a loyal clientele that is reluctant to refinance with another creditor. He stated that even though other lending institutions provide similar products, Washington Mutual "will grab market share" since its competitors do not offer these very same features in "an all-in-one package".
Jim Bradshaw, an analyst with D.A. Davidson, agreed, adding that as long as WaMu Mortgage Plus remains price-competitive, Washington Mutual will likely draw many new consumers who find this "all-in-one" loan idea to be convenient and flexible. Bradshaw reasoned that borrowers have become more sophisticated: "If they think rates are going to go down, they're going to swap into a variable. If they think home loan rates are going to go up, they're going to swap into a fixed."
Having succeeded in keeping tight reins over its subprime business, Washington Mutual now has high hopes for its WaMu Mortgage Plus product, which it believes will generate profits for its home loan unit. The bank's home loan section also foresees a healthier economy and a more robust prime lending market. Rotella explained as follows:
"As the home loans organization continues to improve, this is just going to accelerate the momentum we believe we're building in that business." As it stands now, Washington Mutual is apparently very much pleased with the results. "It's been above our early expectations by a fair amount," confirmed Rotella.
