Overall, I have to say I like Washington Mutual’s WaMu Mortgage Plus, a loan that was introduced nationwide yesterday. It has a home equity line of credit wrapped in, so you don’t have to
apply for a HELOC separately. A home equity line of credit is a great thing to have so you can get instant access to cash for emergencies—or even non-emergencies like a home renovation. My one reservation is that the ease of tapping home equity will make overborrowing even easier for people who already have the tendency to treat their homes like ATMs.
This isn't a subprime product and it's not a no-money-down product, either. The maximum loan-to-value ratio is 89.99%. The amount of money you can tap from the line of credit naturally depends on how much of the principal of the loan you've paid down. If you haven't paid down any principal then you won't have anything to tap.
WaMu Mortgage Plus also lets you change the terms of the mortgage twice a year. For example, if you have a hybrid ARM that's fixed for three years and you're coming up on the end of the three years, you can extend it to five years. The first reset is free; the rest cost $250 each time. You can switch to a fully variable rate loan anytime for free. And the payment options range from interest only to fully amortizing. There's no neg am option. There's no origination, closing, or prepayment fee, or private mortgage insurance requirement.
I talked to a p.r. person for WaMu, Shane Winn. He said the loan is aimed at people who want to have more control of the features of their loan. He said the offering responds to "increasing sophistication on the part of the consumer."
WaMu has a history of creativity in lending. It claims that in 1890 it became the first bank to offer an installment mortgage loan. Earlier this year, it was the only bank included in BusinessWeek's ranking of the 25 companies with the best customer service. On the other hand, WaMu has had its lending troubles, too. Its just-announced first-quarter earnings decline included net losses of $164 million on sales of subprime mortgage loans and adjustments to reflect declines in market values of loans held for sale.
Bottom line: A good loan if you're good at handling credit. A bad one if you can't resist the temptation to spend money.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.