- The Washington Times - Thursday, August 21, 2008

Thousands of troubled home borrowers with loans from IndyMac Federal Bank will be able to switch to fixed-rate mortgages under a new plan from federal regulators, who seized the bank last month after it became the largest regulated thrift to fail.

Most IndyMac borrowers who are seriously delinquent or in default on their mortgages and can document their situation will be able to switch into loans capped at an interest rate around 6.5 percent, the Federal Deposit Insurance Corp. said Wednesday.

The FDIC has been operating the Pasadena, Calif., bank under a conservatorship since July 11.

More than 60,000 of the bank’s home-loan borrowers are 60 or more days behind on their payments, according to FDIC. Thousands of delinquent borrowers will receive proposed offers for modifications in the coming weeks, based on current income information they provided. The first batch of about 4,000 - with an average $359,844 balance owed - will be mailed by week’s end.

The FDIC plan applies to troubled mortgages with higher interest-rate resets, mainly in the category of so-called “Alt-A loans,” which traditionally were made to borrowers with solid credit but little proof of their incomes, or small or no down payments.

Only mortgages on primary residences are eligible, and borrowers must demonstrate their financial hardship by documenting their income, FDIC said. Besides borrowers whose loans are seriously delinquent or in default, the bank also will try to work with those who are unable to make their mortgage payments because of resets or changes in their ability to repay.

FDIC Chairman Sheila C. Bair has been urging mortgage lenders and firms that service mortgages to develop comprehensive plans for modifying unaffordable loans, rather than doing so on a loan-by-loan basis.

The agency’s mortgage plan for IndyMac could be a key test case for that policy. The bank owns about 40,000 home loans directly and services 597,000 for other lenders.

“Our goal is to get the greatest recovery possible on loans in default or in danger of default, while helping troubled borrowers remain in their homes,” Mrs. Bair said Wednesday.

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