On November 14, the FDIC announced that it will be increasing efforts to promote loan modifications to as low as 31% of a borrower’s monthly income through IndyMac Federal Bank. Approximately 2.2 million loan modifications are expected to be covered under this effort. This enhanced modification plan includes:
- · paying servicers $1,000 to cover expenses for each loan modified under its terms; and
- · sharing up to 50% of losses on modified loans that re-default.
For information on eligibility requirements and more details on the loan modifications, see the official FDIC release at //www.fdic.gov/consumers/loans/loanmod/index.html.
The government will continue to prop up homeowners who are qualified only to be renters, not homeowners. As first tuesday has noted before, government interference in homeownership is only going to prolong the bust phase of the current housing cycle by attempting to stave off the inevitable foreclosure of massive amounts of property.
Remember, we’re only at the beginning of this economic downturn. The more time they spend trying to stop the downturn in property prices which will occur to correct the market, the less time they have to focus on stabilizing the economy to keep the recession we’re already in from growing worse.