On Monday, the 4^th largest bank in the nation, Wachovia Corp., announced that it will stop offering an option in it´s Pick-A-Payment mortgage, which allows borrowers to make monthly payments for less then the interest charged. Now borrowers will be left with only 3 options that require at least the monthly interest amount: one for the full amount of the monthly interest, and two with payments on the principal plus the interest that can be set on a 15 or 30 year payment schedule. They will also do away with any prepay fees in their Pick-A-payment mortgages.

The bank first started offering the loan in 2006, after purchasing Golden West Financial Corp., located in CA, for about $25 billion. To date, the sum of the Pick-A-Payment loans is $120 billion.

These changes could be the result of heavy criticism aimed at the controversial option. Paying less then the interest incurred on the loan per month, can make negative amortization. This is where as time goes by, the borrower ends up owing more then the home value, leading to potential foreclosure.

Don Vecchiarello, the spokesman for Wachovia, commented on their policy change stating, “I think in a difficult time, a lot of people are looking to find ways to avoid foreclosure and we want to make sure our customers have the right products to meet their needs,”.

Associate finance professor at the University of NC, Tony Plath, is supportive of Wachovia´s step, “They are taking the riskiest component out, as they should,...There is no one in this market that should be in a loan like that, not right now.”

Wachovia is going to continue looking into their loan processes, as they too have been battered by the credit problems, etc, facing the industry today. Their share prices recently hit a 16 year low, banking out at $14.70. They previously reported almost a $707 million first quarter loss, leading them to hire the Goldman Sachs Group (a Wall Street Investment firm) to analyze their portfolios and possible solutions for their dilemmas.