The borrowers, most of whom initially stated their incomes without proof, must fully document their earnings to obtain modified loans and sign a statement pledging to live in the home. They must have enough income to devote no more than 38% of their gross earnings toward principal and interest on a modified first mortgage, along with home insurance and taxes.
The fact that many borrowers took on hefty second mortgages and have credit card, automobile and other debts will also complicate the picture, FDIC officials said.
But the most difficult pill for borrowers to swallow may be the large majority who won't qualify for the program because IndyMac doesn't own all the loans it services. The FDIC will try to help those borrowers when they get in trouble on their loans despite not being able to use its standard model to modify them, Bair said.
Initial letters are going out this week to about 4,000 borrowers whose loans are owned by IndyMac and are at least 60 days delinquent in payment. The next phase, which the FDIC said could take a few more weeks, will involve 21,000 borrowers, also at least 60 days delinquent, whose loans back IndyMac "private label" mortgage bonds. Additional borrowers in these categories are expected to be helped later as their loans go bad.
IndyMac officials and the FDIC said the program differed from modification plans employed by many private loan servicers because regulators were more motivated to quickly modify loans and the offering was more detailed.
To achieve the 38% debt-to-income ratio, the FDIC may extend the loan term to 40 years and reduce the interest rate -- now typically 7.51% on IndyMac-owned loans -- to as low as 3%. After five years, the rate would rise by 1 percentage point a year until it reached the current Freddie Mac survey rate for conforming mortgages, now about 6.5%, where it would be permanently capped.
The FDIC also may suspend interest on a portion of the loan amount, although the principal not earning interest will still have to be paid off if the home is sold or the loan is refinanced. Michael Krimminger, a policy advisor to Bair, said that option had limited use because it tended to substantially reduce the value of loans.
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scott.reckard@latimes.com
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Modifying your loan
About 66,000 IndyMac loans are delinquent 60 days or more, and about 25,000 of those may be eligible for quick modification to make them more affordable, the Federal Deposit Insurance Corp. said Wednesday. If you're behind on an IndyMac loan, here are steps you can take:
* Wait for details in the mail, which are to be sent within weeks to all borrowers whose loans may be eligible for modification.
* Visit IndyMac's loan-modification website at www.indy machls.com/LoanMod/.
* Call IndyMac at (800) 781-7399. Officials warn that the line may be swamped at first.
* For more information, read a Q&A on the FDIC's website at www.fdic.gov/consumers/loans/modification/indy mac.html#Rollout.
-- E. Scott Reckard
