Indymac and FDIC Working to Adjust Delinquent Mortgages

The FDIC, through Indymac Federal Bank is testing a program to adjust mortgages to help people stay in their homes. The idea is to prevent foreclosures, which are expensive to banks, as well as keep people in their homes.

The WSJ had an interesting article today on how the the FDIC, through Indymac Federal Bank is testing a program to adjust mortgages to help people stay in their homes.  The idea is to prevent foreclosures, which are expensive to banks, as well as keep people in their homes.  Not everyone qualifies to have their mortgage adjusted.  You must not be able to afford your home, must be delinquent, and the bank must not be able to sell the house at a profit in foreclosure.  In other words, the property and owner must be in terrible shape.

Here's one sad example from the article:

"Nanci Puerto, a 40-year-old house cleaner in Antioch, ran into such a problem. She refinanced her house for $637,288 from IndyMac in 2006, taking out cash for a down payment on another property. She and her husband, who works in a machine shop, take home a combined $70,000 a year."

How can someone with a combined salary of $70,000 expect to afford a mortgage of $637,288?  The general rule of thumb is to buy a house that is between 2-3X your annual salary. 

It doesn't seem that anything the FDIC does would keep someone with these stats in their home.  While I emphathize with people losing their homes, I wonder if we all wouldn't be better off simply taking our medicine and letting the market adjust quickly, rather than trying to subsidize everyone and artificially propping up unsustainable situations.

Sol Nasisi
Sol Nasisi: Sol Nasisi is the co-founder and a past president of BestCashCow, an online resource for comprehensive bank rate information. In this capacity, he closely followed rate trends for all savings-related and loan products and the impact of rate fluctuations on the economy. He specifically focused on how rates impact consumers' ability to borrow and save. He also has authored a wee

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Comments

  • celina davis

    March 25, 2009

    indymac is not helping people they are making it harder to stay in your home. Hope the new Co will help . It is no longer Indymac fed bank . It is called onewest.

  • thedorightman

    November 03, 2008

    Maybe i am missing something, but it looks like no matter what financial hijinks are perpetrated on the consumer, we are in for at least 10 years of massive grief, starting with a downward spiral of deflation.

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