New and Old
Old Program: IndyMac Federal’s Program
On July 11, 2008 Pasadena-based IndyMac Bank was closed by the Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC) was named Conservator. Virtually all IndyMac’s assets were transferred to IndyMac Federal Bank.
A mere forty days later, on August 20th, FDIC Chairman Sheila Bair announced the implementation of a systematic loan modification program for distressed IndyMac mortgages. Sheila Bair discusses the program in this short clip…
The modifications were designed to achieve sustainable (affordable) payments at a 38% debt-to-income (DTI) ratio of principal, interest, taxes and insurance. A combination of interest rate reductions, extended amortization (longer loan terms), and principal forbearance (forgiveness) were to be used to achieve this goal of affordable payments. Interest rate reductions are typically for a five year period, and then increase at 1% per year until reaching the Freddie Mac survey rate.
Eligibility is restricted to borrowers in default or delinquent on IndyMac first loans for their primary residences. The press release states:
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.
New Program: FHFA’s Streamlined Program
The Federal Housing Finance Agency (FHFA) announced a new loan modification program on Monday November 11th. The goal of the program is to create a uniform process for streamlined loan modification that will become the industry standard.
This program was devised by Fannie Mae, Freddie Mac, Hope Now (and its twenty-seven loan service partners), Wells Fargo, the Treasury, the Federal Housing Administration (FHA) and the FHFA. The program is very similar but not identical to the FDIC’s IndyMac Federal program. Due to the many loan servicers participating in the program, additional flexibility was needed. The program attempts to simplify and speed up the slow existing loan modification process (which often includes reviewing credit reports and tax returns) by focusing instead on borrower’s income to determine what the borrower can pay. The FHFA’s program uses the same fundamental tools and the same affordability target as the IndyMac Program, and is expected to be available by December 15th.
The new program is available to borrowers who have missed three payments or more, own and occupy the property as a primary residence, and have not filed bankruptcy. To apply for the program, contact your loan servicer (the company to whom you send your mortgage payment). Applicants must provide monthly gross household income, association dues and fees, and a hardship statement.
Limitations: The new program retains some practices that borrowers have found frustrating in their efforts to modify troubled loans. Borrowers who are current on their mortgages but face interest rate increases that will make payments unaffordable are not covered. It also does not provide a new mechanism for reaching out to homeowners. Many homeowners facing foreclosure have not talked to their loan servicer. If you are delinquent on your mortgage payments, be sure to speak with your loan servicer to see what programs they have in place. You may be in for a pleasant surprise. Listen to this homeowner’s story…
Free counseling is available from the HOPE NOW Hotline, or from local HUD approved counselors. You can also contact local HUD-Approved Counseling Agencies for a free consultation. You can find contact information for many mortgage servicing companies on the Hope Now website. Links are provided in the references section below.
Mortgage Modification References:
Other Mortgage Modification Programs: Related Posts
FHFA Press Release: Streamlined Loan Modification Program
IndyMac Federal’s Streamlined Mortgage Modification Program
JPMorgan Chase Loan Modification Program
Chase Foreclosure Assistance Information
Washington Mutual (WaMu) Mortgage and Foreclosure Assistance
EMC Foreclosure Prevention and Loan Modification
Free Mortgage Counseling from the HOPE NOW Hotline:
Free Mortgage Counseling from local HUD-Approved Counseling Agencies (listed by state).
List of Mortgage Servicers
Failure of IndyMac Bank
FDIC’s IndyMac Loan Modification Announcement
Tags: FHFA loan modification, IndyMac loan modification, loan modification, mortgage modification