On November 13, the Federal Deposit Insurance Corporation announced a proposal to promote affordable loan modifications on non-GSE distressed mortgage loans. Under its proposal, the FDIC, acting as a contractor for the Treasury Department, would pay servicers $1,000 to cover loan modification expenses and would share up to 50% of losses incurred if modified loans re-default. The program would (i) only cover owner-occupied properties, (ii) reduce the loss sharing percentage for underwater loans, (iii) involve an affordability test based on a 31% borrower mortgage debt-to-income ratio, and (iv) provide for a termination of the loss sharing guarantee after eight years. If adopted by the Treasury Department, the FDIC estimates (assuming a re-default rate of 33%) that the program would reduce nearly 1.5 million foreclosures of non-GSE distressed mortgage loans and cost approximately $24.4 billion.