Home lifeline may be in mail

Open that letter, it could be good news from your lender

By David W. Hill
dhill@modbee.com
and Alan Zibel
The Associated Press

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Financially strapped homeowners in the Northern San Joaquin Valley are likely to think that new mail from their lenders contains only more bad news: demands for payment, default notices and foreclosure threats.

Rather than opening them, distressed borrowers in a region that's ground zero for foreclosures may be leaving these letters unopened, tossing them in drawers or the trash.

But lenders, under pressure from Washington, D.C., to work with homeowners to modify loans in a bid to rescue the econ-omy, are reaching out to customers with new repayment options.

AP - A foreclosed home is seen for sale in Sacramento, Calif., Wednesday, July 2, 2008. Lawmakers approved a measure requiring lenders to assist Californians facing foreclosure. If signed by the Governor, the bill would require lenders to help property owners avoid foreclosure and gives tenants more time to move out of foreclosed property. (AP Photo/Rich Pedroncelli)

At A Glance
Loan modifications won't be offered to everyone. The FDIC says each case is different and modifications must make economic sense. Getting current financial information from borrowers is critical in determine that. But 50 percent or more of delinquent borrowers could qualify.
To use the IndyMac modification program, borrowers must respond to letters sent to them by the bank or contact it directly. Call 1-877-908-4357 or go to www.imb.com and click the "We can help" button.
Of the delinquent loans on IndyMac's books, 46,580 are eligible for workouts under the current plan. Of those, 6,793 are in the state, with about 20 percent in Southern California.
IndyMac closed its offices in the Northern San Joaquin Valley in August after the FDIC took over. In the valley, IndyMac has more than 400 delinquent loans: 210 in San Joaquin County, 120 in Stanislaus County and 74 in Merced County.
About 4,000 IndyMac borrowers have been given more affordable mortgages. All are fixed-rate loans, but some borrowers can get a rate as low as 3 percent for the first five years before it resets at 1 percent a year until it reaches the fixed rate of 6 percent or less.
By this weekend, the bank expects to have sent more than 15,000 modification offers to borrowers, who could save $380 a month on average.

Help is out there

More on housing

Treasury official: Plan for mortgage help on way

"For the first time in a while, there's good news coming from the bank," said Evan Wagner, vice president and director of corporate communications for IndyMac Federal Bank.

But the critical first step in getting help, Wagner said, is opening those letters from the bank. "We know people are frustrated. But if we haven't heard from you in a while and we don't know what your situation is now, we can't help."

At the direction of the Federal Deposit Insurance Corp., which took control of IndyMac when it failed this summer, about 4,000 IndyMac borrowers have been given more affordable mortgages. By this weekend, the bank expects to have sent more than 16,500 modification offers to borrowers.

Wagner said all modifications are for fixed-rate loans, but some hardship cases could get rates as low as 3 percent for the first five years before it resets at 1 percent a year until it reaches the fixed rate -- about 6 percent or less.

IndyMac's efforts, which are designed to save the FDIC money by curbing losses on foreclosed homes, are being closely watched nationwide. In fact, Bank of America Corp. is taking a similar approach with newly acquired Countrywide Financial Corp. as part of an $8.4 billion, 12-state legal settlement reached this month.

That's why Wagner is urging all homeowners, not just IndyMac customers, to not only open mail from lenders, but start contacting them even if they haven't received notification that they are eligible for loan modifications.

"Don't get discouraged if we can't help you today. We are helping people today we couldn't help a month ago," he said.

Other lenders urged to reach out

Some congressional Democrats and state officials say the FDIC's approach at IndyMac should be replicated as the Treasury Department buys billions in troubled mortgage debt as part of a $700 billion financial industry bailout.

"The country is in crisis," said Iowa Attorney General Tom Miller. "This is something that everybody should do."

IndyMac's mounting losses on risky loans sparked a run on the bank in July and forced the government to take control of the lender. Looking over the books, the FDIC found that roughly 10 percent of the bank's 652,723 residential mortgage loans were delinquent or in foreclosure.

The agency says modifying many of those loans -- which include lowering interest rates to as little as 3 percent for the initial five-year period -- must make economic sense, especially because the agency is soliciting offers from other banks to purchase all or part of IndyMac.

Wagner said the first wave of homeowners being contacted by IndyMac are customers who have been in touch with the bank within the past six months and have supplied it with personal financial data.

That group of IndyMac borrowers has had a response rate of about 75 percent to the workout proposals.

The bigger challenge for IndyMac and other lenders is contacting customers for which they don't have current financial information. Many are delinquent borrowers inundated with collection calls and mail, and often give up hope about holding onto their homes.