Loan Modification Program for Distressed Indymac Mortgage Loans
Loan Modification Program for Distressed Indymac Mortgage Loans
From the FDIC: IndyMac Federal Bank, FSB (“Indymac Federal”) will implement a new program to systematically modify troubled mortgages.
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. The new program will help IndyMac Federal improve its mortgage portfolio and servicing by modifying troubled mortgages, where appropriate, into performing mortgages.
Below are some questions and answers regarding the program:
What loans are eligible? What is the timeline for rollout of offers? How will you determine which loans receive modification proposals first? What modification options will be available to borrowers? How does the IndyMac Federal determine whether the modified mortgage is affordable to the borrower? How do borrowers apply for the program? Where should borrowers interested in the program call to apply?
What loans are eligible? The streamlined loan modifications will be available for most borrowers who have a first mortgage owned or securitized and serviced by IndyMac Federal where the borrower is seriously delinquent or in default. IndyMac Federal also will seek to work with others who are unable to pay their mortgages due to payment resets or changes in the borrowers’ repayment capacities. This streamlined approach applies only to mortgages for the borrower’s primary residence. As with all modifications, borrowers will have to demonstrate their financial hardship by documenting their income.
The goal of this streamlined loan modification program is to achieve improved value for IndyMac Federal by turning troubled loans into performing loans and, thereby, avoiding unnecessary and costly foreclosures. Accomplishing this goal will reduce the costs to the FDIC of the failure of IndyMac Bank and provide improved returns to investors in securitized mortgages.
Some mortgages serviced by IndyMac Federal are subject to additional contractual terms governing loan modifications. While additional steps are necessary to comply with those contracts, IndyMac Federal will work to expedite approvals for modifications to help eligible homeowners keep their homes.
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 modification program does not guarantee a modification offer for IndyMac Federal borrowers.
What is the timeline for rollout of offers? Proposed modification terms already are being sent to IndyMac Federal borrowers based on information provided by the borrowers. Several thousand modification offers will be sent by the end of this week and we will continue to reach out to many more distressed borrowers in the coming weeks. Once the borrower signs the agreement and sends a check for their new mortgage payment, along with the information necessary to verify income, IndyMac Federal will promptly finalize the modification once it verifies that the borrower’s income matches the specific modification offer. Borrowers who have not been contacted by IndyMac Federal with a modification offer, but who are experiencing financial hardship and are falling behind on their mortgage payments should contact the bank to inquire whether they may be eligible for a loan modification that could help them keep their home.
How will you determine which loans receive modification proposals first? IndyMac Federal is focusing on mortgages that are now seriously delinquent or in default in order to prevent further losses on those mortgages and to avoid unnecessary and costly foreclosures. Borrowers who have not been contacted by IndyMac Federal with a modification offer, but who are experiencing financial hardship and are falling behind on their mortgage payments should contact the bank to inquire whether they may be eligible for a loan modification that could help them keep their home.
What modification options will be available to borrowers? Under the IndyMac Federal program, eligible mortgages would be modified into sustainable mortgages permanently capped at the current Freddie Mac survey rate for conforming mortgages (now about 6.5%). Modifications would be designed to achieve sustainable payments at a 38 percent debt-to-income (DTI) ratio of principal, interest, taxes and insurance. To reach this metric for affordable payments, modifications could adopt a combination of interest rate reductions, extended amortization, and principal forbearance.
If, consistent with maximizing the net present value of the mortgage, an interest rate reduction below the current Freddie Mac survey rate is necessary to achieve a 38% DTI, then IndyMac Federal could reduce the rate further for five years. After five years, the interest rate would increase by no more than 1% per year until it capped at the Freddie Mac survey rate where it would remain for the balance of the loan term. Other modification features could be combined with an interest rate reduction, as necessary and consistent with maximizing the value of the mortgage, to achieve sustainable payments.
It is important to remember that there are no fees or other charges for this modification. All unpaid late charges will be waived.
How does IndyMac Federal determine whether the modified mortgage is affordable to the borrower? IndyMac Federal determines whether a modification proposal is affordable based on income information received from the borrower. Modifications would be designed to achieve sustainable payments at a 38 percent housing debt-to-income (DTI) ratio of principal, interest, taxes and insurance. To reach this metric for affordable payments, modifications could adopt a combination of interest rate reductions, extended amortization, and/or principal forbearance.
How do borrowers apply for the program? Thousands of delinquent borrowers will be receiving proposed offers for a loan modification in the coming weeks. These offers are based on current income information provided by the borrowers. Borrowers also may call 1-800-781-7399 to talk with an IndyMac Federal customer service specialist and find out if they may qualify for a loan modification under this program or alternatives that may help them keep their home. Once a borrower has provided financial information to an IndyMac Federal customer service representative, IndyMac Federal will evaluate whether a loan modification may be available and, if so, provide a proposed offer to the borrower by mail.
Once a borrower has received a proposed modification offer, all it takes for them to bring their mortgage current and qualify for a final modified mortgage is to
- sign and return the enclosed Modification Agreement along with a check for their modified monthly mortgage payment and
- provide verification of their income to confirm that they qualify for the proposed modification.
The borrower must then continue to make timely payments at the modified monthly payment amount and comply with all other terms of their mortgage agreements. If the borrower’s verified income information demonstrates that they do not qualify for the proposed modification, IndyMac Federal will contact them to discuss alternatives that may help them keep their home.
Where should borrowers interested in the program call to apply? Borrowers who are delinquent or who are experiencing financial hardship and are falling behind on their IndyMac Federal mortgage should call 1-800-781-7399 to speak with an IndyMac Federal customer service representative. They may also visit the FDIC website (www.fdic.gov) or the IndyMac Federal website (www.imb.com) to find out more about the loan modification program.
For further information on Indymac Federal please visit: http://www.fdic.gov/bank/individual/failed/IndyMac.html
Remarks by FDIC Chairman Sheila C. Bair on the IndyMac Loan Modification Announcement: http://www.fdic.gov/news/news/speeches/chairman/spaug2008.html
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October 22nd, 2008 at 2:03 pm
What Is Loan Modification And How It Can Help Homeowners
We’re all experiencing hard times. The economy went down the drain and most of us can’t afford to pay our bills nor our homes. Credit card companies tightening up their regulations and so mortgage companies, so we can’t fix an adjustable interest rate to get a more affordable mortgage payment. Also some of us are loosing their jobs on top of it, so how we can change it?
First of all I personally think that we can change it by being strong and patient. Of course being patient and strong will not put money in your pockets, but it will definitely keep your health and your hope in order.
You have to understand that probably 90% of the population in America and the whole world is experiencing the same problems as you do.
So what is mortgage modification and loss mitigation?
While you’re struggling to make your mortgage payments due to economic changes, the banks and the government developed programs that can help you. The government has many reasons to help homeowners, some of the reasons are:
6. Try to stabilize the economy so it will not crush completely.
7. Banks approved so many bad home loans.
8. Greed in Wall Street, as well as bank ceo’s and owners.
9. Government couldn’t oversee financial crash
10. Innocent and not innocent homeowners that took loans they couldn’t afford from the beginning.
Ok now back to the loan modification process, what is mortgage modification and loss mitigation?
mortgage modification and loss mitigation help is a adjustment of an existing mortgage a homeowner have, it can be with a government loan or a bank loan. Let’s say you had a 6% interest rate on your mortgage that was matured and now the interest rate have changed to 7%. Now it’s harder for you to make the payment due to increase in the payments and the fact that your job don’t pay you the same as before. This is a perfect example of an average homeowner in America today. So what do you do?
There are two different ways you can go with. You can do it your self or higher a professional mortgage modification broker to do it for you. Let’s assume for a second you do this your self, what are the steps to do it your self?
6. You contact your bank
7. You will ask for the loss mitigation or collection department.
8. Give them a brief of your financial background today- expenses and income.
9. Write a hardship letter. You basically tell them in the letter why you can’t make the payments.
10. They would want to see also some bank statements or pay stubs.
After talking to you on the phone they will process everything you’ve submitted to them. They want to make sure that this time if they will lower your interest rate and make some adjustments for you, if you could make the payments in order without defaulting on the loan. This process is almost as qualifying for any loan, so you need to know how to qualify your self with no mistakes. I would definitely recommend hiring a professional to do this for you, since they know the market and how to make things happen to you in a legitimate way of course.
The process of a loan modification approximately can take up to 3 months, but it’s definitely worth it. You can get a much better interest rate on your mortgage and some banks can also reduce your principle. That’s right, you can also lower what you owe on your property, but you will need a very good reason to do that.
There are some mortgage companies and law firms that help homeowners and real estate investors with loan modification. I think that you definitely need to contact a professional do this for you. Be careful from scam artists, because for this service you normally need to pay up front and there are many people out there that will take your money and will not deliver what they’ve promised.
Good Luck.