CHARLOTTE, N.C. -- Wachovia Bank here has said that it will announce by month's end whether it will remove option ARMs from its mortgage offerings available in California. Wachovia may decide to halt granting the loans, which allow borrowers to select the monthly payment they make per month, as other banks have, given the high number of foreclosures in regions east of Los Angeles like the Inland Empire and Central Valley. The San Francisco Bay Area county of Contra Costa may also be impacted.

Credit unions typically do not offer option ARMs because they carry the risk of negative amortization --made worse in areas where home values are declining-- they do offer a range of adjustable rate loans. The Golden 1 CU has 30-year ARM loans for1, 3, 5, 7, or 10 years with rates that adjust annually for each remaining year of the term, carry no prepayment penalty and can be refinanced at any time.

Orange County Teachers FCU has a 5/1-fixed/adjustable mortgage with a low starting rate that adjusts annually based on the weekly average of the 1-year Constant Maturity Treasury index (CMT) for loan amounts up to $2,500,000. The loan has a 5% cap above the initial start rate.