Union Bank of California, N.A., said late Wednesday it has introduced a 'Two Step' mortgage, featuring a 40-year total term with a fixed rate of interest for the first 15 years and then a one-time adjustment for the remaining term. The program is available for any loan amount up to $5 million and even higher on a case-by-case basis, the San Francisco-based bank said, and offered in California, Oregon and Washington. Under the loan program, borrowers can pay principal at any time on their own schedule; unlike a traditional fixed-rate mortgage, their payment would then immediately decrease the following month. At the end of the 15th year, the interest rate automatically resets to the current market rate at that time and remains fixed for the next 25 years. During this period the loan fully amortizes. “We feel this product will have a fairly wide appeal as both a purchase and refinance loan option since borrowers only need to make interest-only payments the first 15 years,� added Cole. “However, since they have to qualify at an interest rate that's higher than their initial rate, they have to have a good financial management track record and proven ability to debt service the amount being borrowed.� The bank did not specify if the loan program was limited to prime borrowers, but I'd suspect the mention of "good financial track record" refers to just that.