An ‘insane’ mortgage model
The Cavalieres’ financial struggles began in 2006, when Joe, then in his 60s, took out a “pick-a-pay” mortgage from World Savings Bank.
The bank told him he could choose how much to pay each month. What he didn’t realize was that any unpaid interest on the mortgage would continue to compound. And it did — exponentially.
The couple’s lawyer Paul Collier describes the pick-and-pay mortgage model as “insane.”
“It was to get people lower on the economic scale to buy homes under predatory mortgages that would end up yielding profits to the lenders and, honestly, foreclosure to the borrowers,” he said.
Joe ended up out of work for a while and they fell behind on mortgage payments. The couple sent $5,000 to the World Savings Bank to catch up on payments. Things went from bad to worse.
“They said they wanted the whole thing, which was somewhere around $400,000,” Joe recalls.
Then through a series of mergers, Wells Fargo took over the Cavalieres’ mortgage in 2008. The couple continued to struggle to keep up with payments until Wells Fargo foreclosed on their home.
At that point, Kathy reached out to WBZ-TV’s Call for Action team and reporter Cheryl Fiandaca successfully intervened on the Cavalieres' behalf. Wells Fargo reversed the foreclosure and announced it would return the title of the home to the couple.
“We have been working with Mr. Cavaliere since 2011 to help him navigate this situation,” the bank told WBZ-TV. “We have been committed to finding a resolution and are pleased to have this resolved. Pick-a-pay loans were never offered by Wells Fargo.”
The couple — and their lawyer — were stunned at the turnaround.
“I don’t believe in miracles, but it felt like a miracle,” Collier.
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Learn MoreAre pick-a-pay mortgages worth it?
Pick-a-pay mortgages (also known as payment-option mortgages) are a type of negative amortization loan where borrowers can pay less than the full monthly interest, allowing unpaid interest to be added to the loan balance.
Over time, the loan grows rather than shrinks, even when the borrower is making regular payments.
These loans were sold as flexible solutions for buyers who needed lower payments. However, they can quickly become unmanageable, especially when financial setbacks occur.
While pick-a-pay mortgages were popular during the early 2000s housing boom, they’ve largely disappeared due to legal challenges and tighter lending regulations. In 2010, Wells Fargo agreed to a $50-million settlement in a class-action lawsuit over these types of loans. The settlement did not include any admission of wrongdoing.
Pick-a-pay loans are inherently risky. If you’re offered a mortgage that allows negative amortization, think twice. These loans often mask the true cost of borrowing and can leave homeowners under water, even after years of payments. Make sure you get the best mortgage rate you can.
If you're struggling to keep up with mortgage payments, contact your lender as soon as possible. Your lender may be able to help you modify your loan or agree to temporarily stop payments through mortgage forbearance. You may also want to consider debt consolidation.
Thanks to persistence and a little help from investigative journalists, the Cavalieres can finally rest easy — but not every family is so lucky.
Before signing a mortgage, make sure you fully understand the terms and risks.
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