FDIC Proposes Loss-Sharing Model For Loan Mods

Posted by Orb Staff on November 14, 2008 No Comments
Categories : Mortgage Servicing

The Federal Deposit Insurance Corp. (FDIC) has proposed a systematic loan modification program based on the model it is using 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.

A loss-share guarantee on redefaults of modified mortgages can provide the necessary incentive to modify mortgages on a sufficient scale, while leveraging available government funds to affect more mortgages than outright purchases or specific incentives for every modification, the FDIC says. The program would pay servicers $1,000 to cover expenses for each loan modified according to the required standards.

The FDIC adds that it would be prepared to serve as contractor for Treasury and already has extensive experience in the IndyMac modification process.

Complete details of the plan are available at www.fdic.gov.

Source: FDIC

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