The agency’s plan, posted on its Web site Friday, would guarantee 2.2 million modified loans — mainly risky loans made to borrowers with weak credit or small down payments — through the end of next year. Borrowers would get reduced interest rates or longer loan terms to make their payments more affordable.

“If we can avoid those foreclosures, then you will get more stability in the housing market,” said Michael Krimminger, a senior adviser to FDIC Chairman Sheila Bair, in an interview Thursday.

The FDIC says the government’s backing will make the lending industry more willing to modify loans because taxpayers will absorb half of the losses if the borrower defaults again. Also, loan servicing companies, which collect and distribute mortgage payments, would be paid $1,000 for each loan they modify.

Even if a third of borrowers default again on their modified loans, 1.5 million homes would still be saved, the FDIC says. Under the agency’s plan, monthly payments shouldn’t total more than 31 percent of homeowners’ pretax monthly income.

The FDIC says its plans should apply to an estimated 4.4 million loans that are likely to become delinquent though the end of next year. That estimate excludes loans held by mortgage finance companies Fannie Mae and Freddie Mac, which on Tuesday launched their own loan modification program modeled after the FDIC’s effort at failed IndyMac Bank.

Plan Based on FDIC Loan Mod Program in Pasadena California

After taking over failed IndyMac Bank of Pasadena, Calif over the summer, the FDIC launched a loan modification plan in which borrowers receive interest rates of about 3 percent for five years. That plan was used as a model for a loan modification plan announced Tuesday by mortgage finance companies Fannie Mae and Freddie Mac.

If your home is to go into foreclosure, you can face bankruptcy, and have a serious scar on your FICO credit score for up to 7 years.

Freddie Mac Helps Homeowners

But help is available. Each year, Freddie Mac helps over 50,000 families avoid foreclosure. At the end of 2006, only 0.53 percent of Freddie Mac-owned single-family loans were 90-days or more delinquent or in foreclosure, down from 0.69 percent at the end of 2005.

Options Available To Avoid Foreclosure

For borrowers who face foreclosure, there are many workout options they can take advantage of, including loan modifications. Whether it’s reducing the borrower’s note rate or monthly payment, or extending the maturity date, a loan modification is a possible option for a borrower in default.

Applying For the Freddie Mac Loan Modification Program

If you are interested in participating in the free Government program, you can contact your current mortgage broker or lender. We have partnered with licensed brokers to help homeowners receive more information about the loan modification process.

Please use our contact form at the bottom of the page for more information. Once accepted, you will want to follow the steps below if doing a manual application, however, we suggest you use a broker to help you with the process.

How To Complete a FDIC Loan Modification

The following are the five basic steps you must follow to close a loan modification:

Step 1: Deliver two originals of the loan modification documents to the borrower. The borrower must sign, notarize, and return both original documents so you can submit one executed original copy for recordation (if applicable).

Step 2: Execute the loan modification within 25 days of receiving Freddie Mac approval.

Step 3: Submit for recordation if required, and file the loan modification within one business day of receiving the executed Loan Modification Agreement.

* Fax the completed Loss Mitigation Transmittal Worksheet with a copy of the executed Loan Modification Agreement to us at (703) 918-8018 (Attention: Settlement) within one business day of receiving the executed agreement. Do not send Settlement an originally executed Loan Modification Agreement. We require only a faxed copy of the executed agreement.
* Submit one original executed Loan Modification Agreement for recordation (if applicable).
* Send the other original executed Loan Modification Agreement to your document custodian.
* If required, obtain a title policy endorsement or similar title insurance product issued by a title insurance company, such as a Mortgage Priority Guaranty (if available in the state where the property is located), to retain first-lien priority.
* Retain the original recorded (if applicable) Loan Modification Agreement in the mortgage file.

Step 4: Determine if the mortgage is in active or inactive status. After you make this determination, take the following actions during the accounting cycle in which the effective date of the modification occurs (after the Loan Modification Agreement has been executed and before the first modified payment is due):

* Mortgages in Inactive Status
o Report the mortgage as a “reinstatement” in your monthly investor reporting loan-level transaction.
o Remit the reinstatement interest through Global Payments Inc. (GPI) on the applicable remittance due date for the mortgage.

Note: If the existing mortgage is an adjustable-rate mortgage, include any rate adjustments that occurred during the time the mortgage was in an inactive status in the reinstatement interest calculation.
* Mortgages in Active Status
o Report the mortgage as a “non-exception” loan-level transaction in your monthly investor reporting transmission.
o Remit the monthly interest through GPI on the applicable remittance due date for the mortgage.

Step 5: Report and remit using the modified terms.

* Update your mortgage records to reflect the modified terms of the mortgage after you have completed the loan-level reporting and remitting for the accounting cycle during which the effective date of the loan modification occurs, but before you report and remit the first modified payment.
* Report the reinstatement via Electronic Default Reporting using default action code 20 within the first three business days of the month following the month you executed the loan modification, if applicable.
* Report the mortgage, using the modified terms in your monthly investor reporting loan-level transmission, for the accounting cycle in which the first modified payment due date occurred.

If you have an ARM, or adjustable rate mortgage, your loan payments are going to go up when the mortgage rates adjust on your mortgage, either 3 year 5 year or 10 year intervals. When the prices on the mortgage go up, it’s often very difficult for homeowners to continue to make payments on their home and you can easily lose your home.

Payment Deferment Is An Option

The only way to change your mortgage is to refinance, but if you can’t refinance the mortgage, you can use deferment as a way to save money and hopefully be able to pay off future mortgage payments. You need to be in perfect payment history, with no late payments for the bank to consider you for deferment. What you want to do is call your bank and ask for a deferment. Every bank has a deferment department. You can call 10 times and get 9 no’s you just need 1 to say yes.

HUD Assistance For Refinancing

HUD is working on something, but you have to understand this isn’t HUDs problem. They didn’t insure your loan. All they could do is refinance it as well. They are working on it, but don’t expect it to be anytime soon. They are trying to make it soon but its the government. They are trying to set it up so FHA could refinance these loans. They are already in talks to do this. Everybody is hoping sooner then later. Here is an article that explains what HUD and the Government are working on doing. You will just have to hang on as long as you can.

Miss Your Payment

The truth is that they won’t do anything until you get behind. You will have to miss payments before they will even talk to you. Seems stupid but that’s the way it is. You can write a hardship letter explaining why you cannot pay but you would have to have a good reason, usually medical reasons work well. This is a last resort and is not generally advised, but if you are out of answers, this is a last trick you can use to keep the leverage on your side and hopefully refinance your mortgage.

So if you have an ARM and are afraid you can’t refinance, there are some tips you can use to help you out while the lender gets its act together.

We have a number of resources that can help homeowners avoid foreclosure through loan modification programs available for free or very little cost, please see the signup form at the bottom of the page for more information.

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 954-270-1876 to speak with an licensed Loan Modification agent to help you save your home. For more information on programs available, visit the FDIC website (fdic.gov) or the IndyMac Federal website (imb.com) to find out more about the loan modification program.