October 2008
FDIC INDICATES POSSIBLE EXPANSION OF LOAN MODIFICATION PROGRAM FOR DISTRESSED MORTGAGES
The U.S. Department of the Treasury and other government agencies to establish programs to help stem the tide of foreclosures. Ms. Bair ighlighted a loan modification program implemented by the FDIC to rehabilitate bad loans made by the failed financial institution, IndyMac Bank, .S.B., using streamlined loan modification procedures developed by the FDIC. Due to the success of that program, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corp.
(Freddie Mac) subsequently consented to the application of the FDIC’s loan modification program to many of their distressed loans.
Ms. Bair indicated that the FDIC and the Treasury might consider extending the loan modification program to a wider range of loan servicers. Any such loan modification program would build off of the FDIC’s efforts with IndyMac, Fannie Mae and Freddie Mac and would likely have some of the following features:
Suspension of foreclosure actions against certain troubled borrowers
Systematic identification of distressed mortgages that could be rehabilitated into performing loans using standardized loan modification procedures.
Refinancing of distressed mortgages through Federal Housing Administration (FHA) programs Government guarantees for modified loans educing and/or fixing interest rates
Establishing monthly payments that do not exceed a certain debt- to incomeatio for eligible borrowers.
Neither the FDIC nor the Treasury has as yet confirmed that such a program will be implemented.
To read Ms. Bair’s testimony, visit the FDIC’s website:
http://www.fdic.gov/news/news/speeches/chairman/spoct2308.html
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