On August 20, Federal Deposit Insurance Corporation (FDIC) Chair Sheila Bair announced that IndyMac Federal Bank, FSB will begin to systematically modify troubled mortgages. IndyMac Bank, FSB was closed by the Office of Thrift Supervision on July 11 and the FDIC was thereafter appointed as receiver. On the same day, the FDIC was named as conservator for the newly formed IndyMac Federal Bank, FSB.
Under the 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% DTI ratio of principal, interest, taxes and insurance.” Such payments would be achieved by adopting a combination of interest rate deductions, extended amortization, and principal forbearance.
According to the related press release, 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 press release further states that IndyMac Federal will send an estimated 4,000 modification proposals to borrowers this week and thousands of additional proposals in the coming weeks.