BankUnited: Final Nail in Option-ARM Coffin
BankUnited FSB's failure Thursday represented the end of an era, as the last of the large savings and loan institutions that forayed heavily into mortgages that allowed borrowers to pick what they wanted to pay on a monthly basis during the housing boom was shut down.
BankUnited FSB, which was acquired by a
Option-ARMs typically featured three monthly payment options. The lowest option was usually for such a small amount that not only was no portion of the loan's principal balance paid, the previous month's interest wasn't covered and the loan balance increased. This phenomenon is known as negative amortization.
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