November 15, 2008

FDIC has a PlanTo Save 4 million Homes from Foreclesure

FDIC Proposes to Gurantee 2.2 Million Modified Loans

The idea is to help borrowers with weak credit or small down payments. Borrowers would get lowered interest rates or longer loan terms to lower payments. This program can last for a period of time, giving owners some breathing room. The program would attempt to keep monthly payments under 31% for weak borrowers.

According to the FDIC site: The pace of loan modifications continues to be extremely slow (around 4 percent of seriously delinquent loans each month).

Basic Structure of the Proposal
1. By paying servicers $1,000 to cover expenses for each loan modified according to the required standards
2. Sharing up to 50% of losses incurred if a modified loan should subsequently re-default

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. The FDIC expects the plan to apply to 4.4 million loans that are likely to become delinquent though the end of next year.

Fannie and Freddie have their own plans to help their borrowers and the banks, however slowly are beginning to step up. B of A will help renegotiate 400,000 loans and Citi is doing a similar work out program. The trend will take some time to show results because we have so many defaults and it will get worse this year because the credit crunch is beginning to show in terms of jobs. But i think we are beginning to get serious. The biggest risk to success are ineffective policies.

Thanks for Reading

Howard Bell

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