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And it said the number of borrowers had risen partly because the borrowing plan only recently became available.
But over all, the number of borrowers falling behind is growing.
The number of borrowers who had fallen into arrears also fell during the quarter.
The number of borrowers coming off low payments will peak in 1999 and 2000.
While fewer people are beginning default, the number of borrowers who are seriously distressed is rising.
But as the economy falters, the number of borrowers in default grows, magnifying the banks' bad loans.
Analysts said the large number of borrowers suggested smaller banks had been able to tap the cheap loans.
Investors cheered even though Washington Mutual said a record number of borrowers were unable to keep up with mortgage payments.
"A greater number" of borrowers had underpaid but would not be asked to repay the shortfall, said a spokesman.
The number of borrowers that fell behind on their payments was "abnormally high," according to the lawsuit.
Now, with recession looming, the number of borrowers defaulting on these loans is almost bound to increase.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com