FDIC helping homeowner's rework their mortgages | Kevin Colby: News and Political blog

FDIC helping homeowner’s rework their mortgages

The other day, Clark Howard was talking about how the banks should be doing a loan workout, as is often done in commercial real estate, with homeowners who are upside down on their home mortgages. Clark says that the reality is lenders would rather renegotiate the terms of your mortgage than have to foreclose and play property manager. Several weeks ago, Bank of America started reworking home loans with people who were in trouble.

Now even the FDIC is getting involved in the workout game. After the failure of IndyMac, the FDIC voluntarily contacted the bank’s mortgage customers who were upside down with offers of a workout. Why? The federal taxpayer benefits more this way than if the feds have to foreclose, mismanage a property and finally unload it as a distress sale.

So far, the FDIC has lowered monthly mortgage payments for IndyMac customers by $430; they’re adhering to a flat 38% of the homeowner’s income. Meanwhile, other workouts are being orchestrated by Bank of America for their Countrywide division. For more on that, see Clark’s discussion of the topic earlier this month. Simply put, workouts are a smart business move. It’s cheaper to cut a deal with a borrower than to put them out on the street.

On the other side of this issue, you have the question of fairness. Is it fair that you pay your mortgage as agreed and get no help? No, it’s not fair. Workouts do protect the value of your neighborhood by preventing too many foreclosures. But if you drill down to you as an individual borrower, it’s obviously not fair. The world is grey sometimes — even though we’d prefer it to be black and white.

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Tags: bank of america, Clark Howard, fdic, home loan, home mortgage, indymac

One Response to “FDIC helping homeowner’s rework their mortgages”

Paul Collins Says:
November 11th, 2008 at 10:23 am
what about help for homeowners making their payments and following the rules but are still paying high interet rates and struggling