| FHA Loan Programs |
Loss-mitigation plan to yield loans that are affordable
for troubled borrowers and sustainable over the long
term, achieving a higher return for the FDIC
FDIC Chairman Sheila C. Bair today announced that
IndyMac Federal Bank, FSB will implement a new
program to systematically modify troubled mortgages.
The program is designed to achieve affordable and
sustainable mortgage payments for borrowers and
increase the value of distressed mortgages by
rehabilitating them into performing loans.
This in turn will maximize value for the FDIC as well as
improve returns to the creditors of the former IndyMac
Bank and to investors in those mortgages. The new
program will help IndyMac Federal improve its
mortgage portfolio and servicing by modifying
troubled mortgages, where appropriate, into
performing mortgages.
“I have long supported a systematic and streamlined
approach to loan modifications to put borrowers into
long-term, sustainable mortgages—achieving an
improved return for bankers and investors compared
to foreclosure,” said Chairman Bair. “The program we
are announcing today will provide affordable
mortgages for eligible borrowers primarily in the so-
called ‘Alt-A’ market.
It provides a systematic approach for modifying
troubled loans with payment resets due
to negative amortization and other resets -- a market
where we are seeing growing defaults and
foreclosures. The modified loans will be underwritten
to an affordable debt-to-income (DTI) ratio. By
providing long-term sustainable payments, this
program will reduce future defaults, improve the value
of the mortgages, and cut servicing costs.
Our goal is to get the greatest recovery possible on
loans in default or in danger of default, while helping
troubled borrowers remain in their homes. I believe we
achieve that with this framework.”
Chairman Bair continued, “Foreclosure is often a
lengthy, costly and destructive process.
Avoiding foreclosure not only strengthens local
neighborhoods where foreclosures are already
driving down property values, it makes good business
sense. This is a ‘win-win’ program all around.”
The former IndyMac Bank, F.S.B. Pasadena, California,
was closed on July 11th by the Office of Thrift
Supervision and the FDIC was appointed as receiver.
On the same day, the FDIC was named as conservator
for a new institution, IndyMac Federal Bank, FSB.
IndyMac Federal is focusing first on helping those
borrowers with mortgages that are seriously
delinquent or in default, but will seek to work with
others who are unable to pay their mortgages due to
payment resets or changes in the borrowers’
repayment capacities.
Based on this analysis, IndyMac Federal will extend
proposed modification offers to borrowers for
modifications or other loss mitigation designed to
achieve affordable, long-term payments.
IndyMac Federal will send an estimated 4,000
modification proposals to borrowers this week
and thousands of additional proposals in the coming
weeks. Once a borrower receives a modification
proposal, he or she should begin making the modified
payments and provide information to verify his or her
income. Finalization of the modification agreement is
contingent on the borrower providing information to
allow verification of income to confirm that he or she
qualifies for the proposed modification.
Under the IndyMac Federal program, eligible
mortgages would be modified into sustainable
mortgages permanently capped at the current Freddie
Mac survey rate for conforming mortgages.
Modifications would be designed to achieve sustainable
payments at a 38 percent DTI ratio of principal,
interest, taxes and insurance. To reach this metric for
affordable payments, modifications could adopt a
combination of interest rate reductions,
extended amortization, and principal forbearance.
Interest rate reductions below the current
Freddie Mac survey rate may be made for a period of
five years where such reductions are
necessary to achieve a 38 percent DTI, and the
reduced rate is consistent with maximizing net
present value.
For these loans, after five years, the interest rate
would increase by no more than
one percent per year until it is capped at the Freddie
Mac survey rate where it would remain for the balance
of the loan term. Other modification features could be
combined with an interest rate reduction, as necessary
and consistent with maximizing the value of the
mortgage, to achieve sustainable payments.
IndyMac Federal will only make modification offers to
borrowers where doing so will achieve an improved
value for IndyMac Federal or for investors in
securitized or whole loans.
Modification offers will be provided consistent with
agreements governing servicing for loans serviced by
IndyMac Federal for others. The modification program
does not guarantee a modification offer for IndyMac
Federal borrowers.
for troubled borrowers and sustainable over the long
term, achieving a higher return for the FDIC
FDIC Chairman Sheila C. Bair today announced that
IndyMac Federal Bank, FSB will implement a new
program to systematically modify troubled mortgages.
The program is designed to achieve affordable and
sustainable mortgage payments for borrowers and
increase the value of distressed mortgages by
rehabilitating them into performing loans.
This in turn will maximize value for the FDIC as well as
improve returns to the creditors of the former IndyMac
Bank and to investors in those mortgages. The new
program will help IndyMac Federal improve its
mortgage portfolio and servicing by modifying
troubled mortgages, where appropriate, into
performing mortgages.
“I have long supported a systematic and streamlined
approach to loan modifications to put borrowers into
long-term, sustainable mortgages—achieving an
improved return for bankers and investors compared
to foreclosure,” said Chairman Bair. “The program we
are announcing today will provide affordable
mortgages for eligible borrowers primarily in the so-
called ‘Alt-A’ market.
It provides a systematic approach for modifying
troubled loans with payment resets due
to negative amortization and other resets -- a market
where we are seeing growing defaults and
foreclosures. The modified loans will be underwritten
to an affordable debt-to-income (DTI) ratio. By
providing long-term sustainable payments, this
program will reduce future defaults, improve the value
of the mortgages, and cut servicing costs.
Our goal is to get the greatest recovery possible on
loans in default or in danger of default, while helping
troubled borrowers remain in their homes. I believe we
achieve that with this framework.”
Chairman Bair continued, “Foreclosure is often a
lengthy, costly and destructive process.
Avoiding foreclosure not only strengthens local
neighborhoods where foreclosures are already
driving down property values, it makes good business
sense. This is a ‘win-win’ program all around.”
The former IndyMac Bank, F.S.B. Pasadena, California,
was closed on July 11th by the Office of Thrift
Supervision and the FDIC was appointed as receiver.
On the same day, the FDIC was named as conservator
for a new institution, IndyMac Federal Bank, FSB.
IndyMac Federal is focusing first on helping those
borrowers with mortgages that are seriously
delinquent or in default, but will seek to work with
others who are unable to pay their mortgages due to
payment resets or changes in the borrowers’
repayment capacities.
Based on this analysis, IndyMac Federal will extend
proposed modification offers to borrowers for
modifications or other loss mitigation designed to
achieve affordable, long-term payments.
IndyMac Federal will send an estimated 4,000
modification proposals to borrowers this week
and thousands of additional proposals in the coming
weeks. Once a borrower receives a modification
proposal, he or she should begin making the modified
payments and provide information to verify his or her
income. Finalization of the modification agreement is
contingent on the borrower providing information to
allow verification of income to confirm that he or she
qualifies for the proposed modification.
Under the IndyMac Federal program, eligible
mortgages would be modified into sustainable
mortgages permanently capped at the current Freddie
Mac survey rate for conforming mortgages.
Modifications would be designed to achieve sustainable
payments at a 38 percent DTI ratio of principal,
interest, taxes and insurance. To reach this metric for
affordable payments, modifications could adopt a
combination of interest rate reductions,
extended amortization, and principal forbearance.
Interest rate reductions below the current
Freddie Mac survey rate may be made for a period of
five years where such reductions are
necessary to achieve a 38 percent DTI, and the
reduced rate is consistent with maximizing net
present value.
For these loans, after five years, the interest rate
would increase by no more than
one percent per year until it is capped at the Freddie
Mac survey rate where it would remain for the balance
of the loan term. Other modification features could be
combined with an interest rate reduction, as necessary
and consistent with maximizing the value of the
mortgage, to achieve sustainable payments.
IndyMac Federal will only make modification offers to
borrowers where doing so will achieve an improved
value for IndyMac Federal or for investors in
securitized or whole loans.
Modification offers will be provided consistent with
agreements governing servicing for loans serviced by
IndyMac Federal for others. The modification program
does not guarantee a modification offer for IndyMac
Federal borrowers.
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