IndyMac Bank and BofA are Modifying Mortgage Payments - Can It Help You?

I read an article on CNN Online that talks about the mortgage modifications that IndyMac and BofA are doing - if you have a mortgage with either you should read the article, you may be able to get help on your mortgage payment. Here is a portion of the article; read the full article at http://money.cnn.com/2008/10/24/real_estate/indymac_solution/index.htm?postversion=2008102416

One failed bank gets the housing fix right
When the FDIC seized mortgage giant IndyMac it was one of the biggest bank failures ever. Now the troubled lender just may lead us out of the housing mess.

By Amanda Gengler, Money Magazine writer

"Under IndyMac's program, the lender modifies a loan so that the borrower's new mortgage payment, including insurance and taxes, eats up no more than 38% of their pre-tax income. This percentage, known as a debt to income ratio, topped 50% for some loans during the boom.

To achieve this lower payment, IndyMac can lower the interest rate, extend the life of the loan to, say, 30 or 40 years, defer some principal to the final years of the loan, or a use a combination of these strategies.

IndyMac is also trying to simplify the process for borrowers. It is overnighting loan forms to eligible customers with a signature required upon receipt. "It doesn't show up with your regular mail, coupons and junk mail, because the key is getting the consumer to open it," said FDIC spokesman David Barr.

The papers clearly spell out a borrower's new loan terms, including the interest rate and monthly payments over the life of the loan. The borrower simply signs and returns the documents with the first lower monthly payment.
B of A follows suit

Bank of America (BAC, Fortune 500) launched a similarly systematic program earlier in October. That program, scheduled to start in December, came as part of a settlement with state attorney general offices that sued Countrywide, which B of A recently acquired, for predatory lending practices. It's expected to help 400,000 troubled borrowers and is actually slightly more aggressive than IndyMac's plan.

B of A will use a 34% debt-to-income ratio to calculate the affordable monthly payment for its customers, and may also write down the principal balance of some negative amortizing loans. IndyMac will not forgive debt, but instead will add principal to the final years of a loan if necessary.

Additionally, IndyMac's program is now being applied to many delinquent loans owned by Freddie Mac (FRE, Fortune 500), Fannie Mae (FNM, Fortune 500) and other investors, Bair said in her testimony Thursday."