The Federal Deposit Insurance Corp. is encouraging private lending institutions to emulate the agency’s program for helping distressed borrowers at IndyMac Federal Bank, which the FDIC seized in July.
Under the FDIC’s program, distressed borrowers can arrange loan modifications with a goal of 38 percent of gross income going to house payments through the use of interest rate reductions, amortization term extensions, and in some cases, principal deferments.
“I would encourage all industry participants to adopt the FDIC Loan Modification Program as the standard approach in dealing with the grave problems facing us with continued mounting foreclosures,” said Sheila Bair, the FDIC chairwoman.
Last week, Bair proposed a $24 billion federally-backed bailout program for distressed homeowners, which has been opposed by other members of the Bush Administration.
As of today (Nov. 20) IndyMac has completed more than 5,300 loan modifications in response to mailings sent to more than 23,000 eligible borrowers, the FDIC said. Thousands more modifications are in the pipeline.
IndyMac spokesman Evan Wagner said Orange County home owners accounted for about 3 percent of the bank’s 46,000 severely late loans as of mid-October and may be eligible for modification.
Nationwide, 1.6 million total loans are more than 60 days delinquent, a number expected to exceed 3.8 million through the end of 2009, according to the FDIC.
For more information on the FDIC’s “Mod in a Box,” CLICK HERE.
IndyMac customers who need assistance with their loans can contact the bank by calling 877-908-4357.
Related stories …
- FDIC moving to Irvine, now hiring
- FDIC proposes $24 billion to pay half of lender losses on modified loans
- Double mortgage deductability! Good idea?
Other business stories …
- 39% of O.C. home sales are foreclosures
- Will drop in foreclosures stick?
- O.C. foreclosures plunge to 7-month low
- O.C. home price now $225,000 off peak
- Bargains boost SoCal home sales a record 67%
- O.C. Oct. homebuying up 66%
Virtually all mortgage mods that don’t involve a permanent principal balance reduction simply delay the inevitable. About 50% of IndyMac’s prior mods have already defaulted again, many on the first new payment!
Somebody has to eat the market losses. There is no escaping the mathematical fundamentals. It’s either the bankers or the taxpayer.
Let me explain what I know about mortgage modification or in the vernacular “Mo Mod” There is no reduction of principal and interest rate and terms are changed for a short period of time. The cost are rolled into the note similar to a re-finance. This Mo Mod is the only way to stabilize the mortgage markets and protect the equity value of your home. Another couple of months with no program in place, all of our American Dreams will be underwater. This Mo Mod is like the investment that Paulson made into the banking systems. We will be able to weed out the bad eggs with the knowledge of the underlying illiquid asset that Sheila Bair and Henry Paulson are talking about. Yes this a painful experience but has taught the country a valuable lesson.. and that is go back to proper valuation techniques, sound underwriting along with proper risk management. The NPV model needs an appraisal to determine the underlying value of the asset.
Sheila Bair needs to get of hold of the Mo Mod platform and soothe the flames of the mortgage foreclosure crisis.
That company is called Smithfield & Wainwright with the Mo Mod, check out the press releases! Wow!
Thanks for the Mo Mod information. Could the FDIC come up with a better name than Mod in a Box. Jack in the Box started in California, I researched the firm doing the Mo Mod and it looks like sound real estate appraisal valuation which would be needed to know the value of the asset being Mo Mod’ed. This would then allocate the difference of the insurance being proposed to make up the difference of current value compared to outstanding mortgage balance. I applaud the company of the Mo Mod to have the foresight which is needed in this time of crisis, going back to sound values like we had 20+ years ago.