How Does a Loan Modification Work?

A loan modification does not change the amount of money you owe, rather it changes your interest rate and/or over how long you will pay your loan amount.

When you extend the length of your loan, you increase the amount you owe due to interest.

By granting you a loan, your lender expects you to live up to your end of the deal and pay back their money and they are entitled to get it one way or another.

Often times, a loan modification can pay for itself simply because the payments are adjusted so that you can save your home, ie would you pay $5,000 to save your home from foreclosure?

They are only modifying your loan because they want to save the home from foreclosure, which costs the banks additional money. As a result, if you are looking for a loan modification, there are still options for your to pursue.

Refinance Your Mortgage

Refinancing is one of the best and easiest ways of saving your home from foreclosure. It involves taking your mortgage and giving it to a new lender or refinancing with your current bank.

You go to them and tell them you need to have your mortgage modified, and changed from an ARM (adjustable rate mortgage) and turned into a standard fixed rate mortgage. This will cost a little bit of money in closing costs, but you can bundle these into the overall cost of the mortgage itself.

Aside from refinancing, you can always attempt to modify your loan, but you may be at the mercy of the banks and Government bailout plans.

Where should borrowers interested in the FDIC Loan Modification 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. Please also use our resources on the site to find a representative that can represent you and help you save your mortgage from foreclosure.

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.

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.

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.

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.

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.

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 received a proposed modification offer, all it takes for them to bring their mortgage current and qualify for a final modified mortgage is to

1. sign and return the enclosed Modification Agreement along with a check for their modified monthly mortgage payment and
2. 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