San Diego Housing Bubble News and Analysis

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FDIC Unveils Mortgage Modification Plan for IndyMac Borrowers

By Alison Vekshin

Aug. 20 (Bloomberg) -- The Federal Deposit Insurance Corp. unveiled a plan to modify mortgages for IndyMac Federal Bank FSB borrowers, a month after the agency suspended foreclosures on $15 billion in loans it owns after taking over the failed bank.

The FDIC, which is running IndyMac while seeking a buyer, will reduce interest rates, base payments on a lower loan principal and extend repayment plans to help struggling homeowners, FDIC Chairman Sheila Bair said today in a conference call with reporters.

``We hope to keep tens of thousands of troubled borrowers in their homes,'' she said.

Bair has led regulators in pressing mortgage-servicing companies to modify loan amid rising foreclosures in the worst housing slump since the 1930s. IndyMac Federal has about 740,000 loans that it owns or services for other companies, the FDIC said. The bank services $184 billion in mortgage loans.

The FDIC, a Washington-based agency that insures deposits at U.S. banks, took over Pasadena, California-based IndyMac in July, making it the third-largest federally insured bank to be seized by federal regulators.

Borrowers will be eligible for the modification program if they have a first mortgage serviced by IndyMac and are ``seriously delinquent'' or in default. The program is aimed at borrowers with Alt-A mortgages, which don't require borrowers to provide proof of income.

U.S. bank repossessions in July almost tripled from a year earlier as foreclosure filings increased 55 percent, RealtyTrac Inc. said in an Aug. 14 report.

To contact the reporter on this story: Alison Vekshin in Washington at avekshin [at] bloomberg [dot] net.