Loan aid offer is a hard sell

Reduce the interest rate to as low as 3%.

Extend the loan's term to 40 years.

Waive interest on a portion of the mortgage balance. The borrower would still owe that amount but wouldn't have to pay it back until the loan was refinanced or the house was sold.

But of the 35,000 seriously delinquent IndyMac customers who were sent letters about the possibility of such modifications, more than half have yet to be heard from, officials said this week.

The response rate is higher -- 73% -- for borrowers who had already talked with IndyMac and provided their current income. The letters to such people were sent by registered mail and proposed new mortgage terms. If the borrower signs the agreement and returns it in an enclosed, prepaid Federal Express envelope -- along with proof of income and a first new monthly payment -- the mortgage can be modified with no further action by the borrower.

So far, IndyMac has completed the modification process for about 3,500 of these borrowers, with "thousands more in the pipeline," Krimminger said. The average reduction in principal and income payments has been 23%, saving the typical borrower $380 a month.

But IndyMac has no current income information for about 20,000 seriously delinquent customers who were sent letters. Many of them hadn't needed to document their income when they took out their loans. People in that group were sent invitations to discuss loan modifications by regular mail, and only 15% to 20% have replied, the FDIC said.

Still, that response rate "is remarkably off the charts to what other servicers are getting -- we're hearing about response rates of 4% to 5%," Krimminger said. "So I'm pleased but also frustrated because I'd like it to be a lot higher. These are people we need to get in touch with. It's kind of a last effort before we have to go into foreclosure."

IndyMac has even resorted to paying a bounty of sorts to mortgage counseling groups to contact borrowers who haven't responded, Krimminger said. The reward is $150 after the borrower's income is documented, with an additional $350 paid if the loan is successfully modified.

The agency also is experimenting with letters that tell borrowers how much they would save if their income is within a certain range. Krimminger and consumer advocates said just seeing a hypothetical number could prompt a borrower to sit down and talk.

To be sure, not everyone can be helped.