Golden State Mortgages May Tarnish Wachovia

As housing prices plummet in California, homeowners are increasingly finding that their mortgage debt is higher than the value of their homes. Faced with such a situation, some borrowers have simply stopped paying their loans.

This crisis of confidence is already hurting Wachovia(WB Quote), which has a massive portfolio of mortgages in the state. But some analysts say the issues are about to get much worse for the bank as defaults increase.

Through its purchase of California-based savings and loan Golden West in 2006, Wachovia inherited a $120 billion adjustable-rate mortgage portfolio, which now amounts to 15% of the bank's total assets. ...