The FDIC has initiated a systematic loan modification program at IndyMac Federal Bank to reduce first lien mortgage payments to as low as 31% of monthly income. Modifications are based on interest rate reductions, extension of term, and principal forbearance.
The FDIC’s proposal is designed to promote wider adoption of the systematic loan modification program:
- by paying servicers $1,000 to cover expenses for each loan modified according to the required standards; and
- sharing up to 50% of losses incurred if a modified loan should subsequently re-default
The FDIC envisions that the program can be applied to the estimated 1.4 million non-GSE mortgage loans that were 60 days or more past due as of June 2008, plus an additional 3 million non-GSE loans that are projected to become delinquent by year-end 2009. Of this total of approximately 4.4 million problem loans, the FDIC expects that about half can be modified, resulting in some 2.2 million loan modifications under the plan
Please click here to read further details of the proposal on the FDIC’s website.