CHARLOTTE - When she stopped by a Wachovia branch in Charlotte last month, Marilyn O'Connor asked about refinancing her townhome. Instead, she got a pitch for a "Pick-A-Payment" mortgage that offered flexible payment options but a higher interest rate.

O'Connor said she initially agreed to apply for a Pick-A-Payment loan until she learned the interest rate. The full principal and interest payment option had a rate of 6.85 percent, higher than the 6.75 percent rate on her existing mortgage. A regular 30-year fixed rate at the time had a 5.5 percent rate, according to her loan documents.

"I said, `Are you crazy?' " O'Connor, 66, said. "I'm not going to spend that much on interest. It was very disheartening."

Since buying Pick-A-Payment specialist Golden West Financial in 2006, the Charlotte-based bank has been rolling out these nontraditional loans at branches and mortgage offices around the country. But the push has become a sore spot with some customers and employees. Loan officers say they have faced intense pressure from the company to persuade borrowers to use the loans.

Wachovia has required its loan officers to sell a minimum number of Pick-A-Payment, traditional and other loans or face discipline, including termination, according to interviews and documents. A training script obtained by the Observer tells loan officers, known as mortgage consultants, how to sell Pick-A-Payment loans, including empathizing with customers' cash flow problems.

An excerpt: Do you have any credit card debt? [Wait for acknowledgement.] I know I certainly have my share. And we're paying 13 to 29 percent.

The bank said it has sales goals like any company. Spokesman Don Vecchiarello declined to provide details on past targets but on Friday said the bank no longer has a "specific Pick-A-Payment goal at this time for employees to sell."

While Wachovia dismisses employees from time to time for underperformance, "we have not terminated anyone for not selling enough Pick-A-Pay loans and will not in the future," Vecchiarello said.

The loans can be more profitable for the bank because they carry a higher interest rate than traditional mortgages and because the bank keeps them in its own portfolio, instead of selling them off to investors. Consumer advocates contend they should be reserved for savvy customers who understand a complex product that can increase a borrower's loan balance instead of decreasing it.

Analysts also are worried because Pick-A-Payment loans are showing higher delinquencies than traditional mortgages amid the U.S. housing crisis, particularly in tough housing markets such as California. The bank's stock is down more than 56 percent since agreeing to buy Golden West, which also gave Wachovia new West Coast branches. The shares closed Friday at $25.99, down $1.08.

The bank, which has burnished a strong customer service reputation in recent years, acknowledges the loans aren't right for all customers but argues they offer flexibility to borrowers who need extra cash for savings or to pay down other debt. The bank says the loans come with numerous protections, including a cap on the amount the loan balance can increase. It also analyzes the borrower's ability to repay based on the full interest rate, not a low introductory rate.

Pick-A-Payment loans are "one of the many products we're able to offer," Vecchiarello said. "We feel like we do it in the right way."

Monthly options

The Pick-A-Payment, or Pick-A-Pay, loan gets its name because it comes with four monthly payment options. Homeowners each month can make one of four payments:* Full interest and principal payment that pays off the loan in 30 years.

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