FDIC's Foreclosure Prevention

The FDIC, as conservator for IndyMac, has suspended all foreclosures and is aiming to modify 40,000 out of 60,000 currently delinquent IndyMac mortgages.  In the six weeks since the takeover FDIC has mailed out 15,000 loan modification proposals, and has already received signed agreements from 3,500 homeowners.  On average payments are being reduced by $350 monthly.  Details are in Chairman Sheila Bair's testimony today before the Senate Banking Committee. 

In contrast, August and September loan modifications by subprime and alt-A servicers generally are still wildly inconsistent and falling short.  Nearly a third of modifications are still increasing, rather than decreasing, monthly payments.  Some servicers are aggressively modifying loans while others show virtually no modification activity.  I will post a more detailed report when I have the October numbers.

Comments

[Annette]

where do I locate a legitimate loan modification expert in No. California?

[Jason Kilborn]

Many people (e.g., Adam Levitin) continue to challenge the notion that any modification program can have much success given legal/contractual constraints. On that point, the following passage from Bair's testimony is quite enlightening (emphasis added):

"Initially, the program was applied only to mortgages either owned by IndyMac Federal or serviced under IndyMac Federal’s pre-existing securitization agreements, which provided sufficient flexibility. However, with their agreement, we are now applying the program to many delinquent loans owned by Freddie Mac, Fannie Mae, and other investors. We are working with the owners of the remaining mortgages to gain approval to apply the new modification program to those loans as well. LET ME EMPHASIZE THAT SECURITIZATION AGREEMENTS TYPICALLY PROVIDE SERVICERS WITH SUFFICIENT FLEXIBILITY TO APPLY THE INDYMAC FEDERAL LOAN MODIFICATION APPROACH. IN FACT, THE AGREEMENTS AT INDYMAC FEDERAL WERE MORE RESTRICTIVE THAN THOSE THAT APPLY TO MANY OTHER SECURITIZATIONS."

If this is true (and, of course, I have no reason to believe it isn't, particularly given the authoritative source), this strikes me as a VERY powerful counterpoint to Levitin's and others' pessimism as to these sorts of programs.

Thanks for following this critical issue and sharing this info--I hope Adam is listening (reading).