Alert August 26, 2008

FDIC Implements Loan Modification Plan For IndyMac

The FDIC announced that it was implementing a loan modification plan (the “Plan”) to systematically modify troubled mortgages at IndyMac Federal Bank, FSB (“IndyMac Federal”).  On July 11, 2008, the OTS closed IndyMac Bank, FSB (the “Predecessor Thrift”), and the FDIC was appointed as receiver of the Predecessor Thrift and opened a new institution, IndyMac Federal. 

Under the Plan (which affects first mortgage loans either held or securitized by the Predecessor Thrift), modified loans will be capped at the Freddie Mac prime survey rate for conforming mortgages of 6.5% and must achieve a debt-to-income ratio of 38%, including taxes and insurance.  The modified loans also may receive principal forbearance, waiver of certain fees  and an extension of payment terms.  The FDIC stated that it has two goals in undertaking the Plan:  (1) keeping borrowers in their homes; and (2) increasing the value of IndyMac Federal to a potential buyer.