Speaking of Short Opportunities - WB

And I don't mean Warner Brothers because the chances that the Coyote catches the Road Runner are far greater than Wachovia's business model ultimately succeeding.

So Bloomberg today reports that Wachovia made a statement regarding their Option ARM loans:
"Wachovia is contacting applicants through independent mortgage brokers to ensure ``the customer understands the key features of the Pick-A-Payment loan product,''"

Now the goto response here is - well you better be sure it's a verbal communication because I would imagine the majority of these people are illiterate, don't speak English or are blind.

So what happens when the individual who signed up for the truly amoral loan is made aware of their predicament? Before you answer that question look at this stellar piece of business practice:
"Once option-ARM borrowers' loan balances reach a predetermined limit of 125 percent of the mortgage amount, Wachovia requires higher payment rates."

Ok so say the part time DJ who spends his days working as a bus driver and makes $30,000/year is contacted regarding his $500,000 loan. (How did he get that loan? His heart was confirmed to be beating at the time of the closing.) Now he paid the minimum for 2 years and added to the principle so that he hit the magic 125% mark and now owes $625,000. Now imagine that DJ SelfDestruction lives in Sacramento, California and housing prices in his neighborhood have fallen 40%. So now the house he "purchased" for $500,000 is worth $300,000. And finally he is told that he no longer can pay the $400/month he's been paying and must come up with $5,000/month to pay off the mortgage.

So again I state the obvious which is the Coyote is much more likely to catch the Road Runner than Wachovia recover their money.