October 26, 2008

From the Chair of the FDIC to the Committee on Banking, Housing and Urban Affairs before the U.S. Senate

TARP gives the Treasury the authority to use loan guarantees and credit enhancements to facilitate loan modifications to prevent foreclosure.

The government will establish flexible standards for loan modifications and provide guarantees for loans meeting those standards, Ms. Blair said. The FDIC is working "closely and creatively" with Treasury on such a program.

The FDIC now is managing approximately 712,000 mortgage loans, including more than 60,000 mortgage loans that are more than 60 days past due, in bankruptcy or in foreclosure.

Of the more than 60,000 mortgages serviced by IndyMac Federal that are more than 60 days past due, in bankruptcy or in foreclosure, approximately 40,000 are potentially eligible for our loan modification program. Where the workouts have been completed, the modifications have reduced borrowers' monthly payments by more than $380 on average. That will keep a lot of people in their homes and more homes off the market. But its a big big problem, some say 4 million homes are facing foreclosure and the US wont have the money to save them all.

For the real estate industry, these kinds of buy ups and work outs will yield some results. The banks..... I wouldnt count on it. If you look at your credit card, you dont see the interest rate reflecting the lower rates the banks are benefiting from. Im sure they will keep loans limited and restrictive even when their bad paper is off the books. That what recapitalizing is...saving and rebuilding balance sheets, not looser loan standards. This will take a long time....

Thanks for Reading
Howard Bell
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