Maybe the FDIC Did Have the Best Loan Modification Plan?

Posted by Bill Rice
July 24, 2009

Considering all the heat FDIC Chair Sheila Bair got during her campaign for loan mods and the program she implemented at IndyMac Bank, I found this article interesting. I guess the “proof is in the pudding” now.

Housing Wire: IndyMac Modification Outperform Industry Redefault Standards

As of May 31, 2009 the redefault rate among modified IndyMac Federal Bank (IndyMac) loans was 15.6%. The bulk of these modifications took place in Q408 — as early as September 2008, according to FDIC spokesperson David Barr — indicating many of these loans are at least six months past modification.

The FDIC rate is well below the industry standard six-month redefault rate, which ranges from 30% to more than 40%.

I wonder what an updated report from OCC Comptroller John Dugan would look like now?

loan modifications

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  • I think it's too early to tell on the re-defaults...the Indymac success rate may be better because they're actually holding the mods to a higher level. Many other banks and lenders are simply offering repayment plans or loan workouts that either keep payments the same or actually INCREASE them...so it could be a matter of checks and balances to ensure borrowers receive something beneficial.
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