FDIC Loan Modification Program

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A message from FDIC Chairman Sheila Bair

I have long supported a systematic and streamlined approach

to loan modifications that puts borrowers into affordable, longterm

mortgages while achieving an improved return for

bankers and investors compared to foreclosure. Using this

type of approach, we can help stabilize the U.S. financial

markets by minimizing foreclosures on the 6.4 million loans

that are currently past due or are projected to become

delinquent by mid-2010. Avoiding foreclosure, when it is

financially prudent to do so, reduces the downward pressure

on the price of nearby homes and helps communities to

maintain the services they provide to neighborhoods.

Unnecessary foreclosures perpetuate the cycle of financial

distress and risk aversion, which potentially could cause

housing prices to overcorrect and create even larger losses for

both borrowers and the financial industry.

At IndyMac Federal Bank, the FDIC initiated a systematic and streamlined loan modification

program for delinquent borrowers who occupy their home. These distressed mortgages are being

rehabilitated into performing loans while avoiding unnecessary and costly foreclosures. By

achieving mortgage payments for borrowers that are both affordable and sustainable, we expect

to reduce future defaults, improve the value of the underlying mortgages, and cut servicing costs.

This approach makes good business sense and creates a ‘win-win’ solution for everyone. I

strongly encourage bankers, servicers, and investors to implement systematic and streamlined

loan modifications that result in monthly mortgage payments that borrowers can afford over the

long term.

To assist bankers, servicers, and investors in this process, this guide provides an overview of the

FDIC’s loan modification program. It outlines our program terms at IndyMac Federal Bank, offers

insight into the specific portfolio characteristics that drive modification modeling at that bank, and

provides a framework for developing and implementing a similar program at your institution.

While the final program each of you implements will be based on the characteristics specific to

your respective portfolios, I am confident that the value of such a program will benefit both your

institution and your investors while helping many troubled borrowers remain in their homes. Your

support in this industry-wide effort will help avoid unnecessary foreclosures and bring stability to

the housing and mortgage markets during this time of unprecedented economic turmoil.

Sincerely,

Sheila Bair

FDIC Loan Modification Program Page 3

Loan Modification