Wachovia: Do Do Do . . . Another One Bites The Dust

I’m adding this one to my Mortgage Meltdown Sountrack: Subprime Apocalypse.

Queen: Another One Bites The Dust

From Bloomberg:

Wachovia and Washington Mutual may have combined second- quarter losses of $3.8 billion, according to analysts surveyed by Bloomberg. Wachovia, the nation’s fourth-biggest bank by assets, and Washington Mutual, the largest saving and loan, rank among the top providers of “option-ARM” and subprime mortgages that now have some of the highest default rates.

Why’s this bad? ARMs are ‘Adjustable Rate Mortgages’. In essence, here’s the quick n dirty version: the borrower takes out a loan for the first two years; after two years, the interest rate re-sets, possibly to a higher rate, resulting in defaults in some instances.

h/t: m-implode.com

Related: http://www.newyorkfed.org/mortgagemaps/