Costumer Awareness
The Fair Credit Reporting Act
The Fair Debt Collection Act
The Fair Billing Act
The Equal Credit Opportunity Act
The Truth In Lending Act

IndyMAC Plan

  • With the Bush administration refusing to enact FDIC Chairwoman Sheila Bair's controversial loan modification plan, lawmakers are taking matters into their own hands.

    • Offer proactive workout solutions designed to address borrowers who have the willingness but limited capacity to pay.
    1. Return the loan to a current status.
    2. Capitalize delinquent interest and escrow.
    3. Modify the loan terms based on waterfalls, starting at a front-end 38 percent HTI ratio down to a 31 percent HTI ratio subject to a formal NPV floor.
    4. Reduce interest rate to as low as 3 percent.
    5. Extend, if necessary, the amortization and/or term of the loan to 40 years.
    6. Forbear principal if necessary.
  • Provide borrowers the opportunity to stay in their home while making an affordable payment for the life of the loan.
  1. Require the borrower to make one payment at the time of the modification.
  2. Cap the interest rate at the Freddie Mac Weekly Survey rate effective as required to meet the target HTI ratio, fixing the adjusted rate and monthly payment amount for 5 years.
  3. Step up the initial interest rate gradually starting in year 6 by increasing it one percentage point each year until reaching the Freddie Mac Weekly Survey rate cap.
  • Use a financial model with supportable assumptions to ensure investor interests are protected.
  1. Input borrower specific income information into the NPV Tool, which provides a real-time workout solution.
  2. Perform automated loan level underwriting across large segments of the portfolio to support pre-approved bulk mailings.
  3. Verify income information the borrower provided via check stubs, tax returns, and/or bank statements.
  4. Compare the cost of foreclosure to mitigate losses.
  5. Mandate that the cost of the modification must be less than the estimated foreclosure loss.
  • Borrower eligibility
  1. The loan is at least 60 days delinquent where the loan is considered one day delinquent on the day following the next payment due date. Many servicing contracts often contain a standard clause allowing the servicer to modify seriously delinquent or defaulted mortgages, or mortgages where default is “reasonably foreseeable”.
  2. Foreclosure sale is not imminent and the borrower is currently not in bankruptcy, or has not been discharged from Chapter 7 bankruptcy since the loan was originated.
  3. The loan was not originated as a second home or an investment property.

We (IndyMac Bank) commend FDIC Chairman Sheila Bair for her leadership in developing a systematic loan modification protocol. FHFA, the GSEs and HOPE NOW relied heavily on the IndyMac model in developing this new protocol.

Fannie Mae / Freddie Mac Plan

In the task at hand to make headway against foreclosures and the depressed housing market. Fannie Mae and Freddie Mac entered a new phase on December 9, 2008 for a fast-track program meant to make "hundreds of thousands of mortgages affordable to people who can't currently meet their monthly payments.

Through the SMP, servicers may change the terms of a loan to reduce a borrower's first lien monthly mortgage payment, including taxes, insurance and homeowners association payments, to an amount equal to 38 percent of gross monthly income. The changes in terms may include one or more of the following:

  1. Adding the accrued interest, escrow advances and costs to the principal balance of the loan, if allowed by state law;
  2. Extending the length of the mortgage loan as appropriate;
  3. Reducing the mortgage loan interest rate in increments of 0.125 percent to an interest rate that is not less than 3 percent. If the new rate is set below the market interest rate, after five years it will step up in annual increments to either the original loan interest rate or the market interest rate at the time of the modification,whichever is lower;
  4. Forbearing on a portion of the principal, which will require the borrower to make a balloon payment when the loan matures, is paid off, or is refinanced.




Eligibility Requirements

  1. Conforming conventional and jumbo conforming mortgage loans originated on or before January 1, 2009;
  2. Borrowers who are at least three or more payments past due and are not currently in bankruptcy;
  3. Only one-unit, owner-occupied, primary residences; and
  4. Current mark-to-market loan-to-value ratio of 90 percent or more.

New Servicer Guidance

Fannie Mae's foreclosure prevention efforts have generally been made available to a borrower only after a delinquency occurs. Under Fannie Mae's new guidance, loan servicers can use foreclosure prevention tools to assist distressed borrowers when a borrower demonstrates the need. As noted above, these guidelines apply to borrowers who are still current in their payments, but whose default is reasonably foreseeable. This new guideline is effective immediately.



Hope for Homeowners Plan (HUD) / FHA)

The H4H Program is effective for endorsements on or after October 1, 2008, through September 30, 2011.

  • Affordability versus value: lenders will take a loss on the difference between the existing obligations and the new loan, which is set at 96.5 percent of current appraised value. The lender may choose to provide homeowners with an affordable monthly mortgage payment through a loan modification rather than accepting the losses associated with declining property values.
  • Borrower eligibility: Lenders that determine the H4H program is a feasible and effective option for mitigating losses will assess the homeowner’s eligibility for the program:
  1. The existing mortgage was originated on or before January 1, 2008;
  2. Existing mortgage payment(s) as of March 1, 2008 exceeds 31 percent of the borrowers gross monthly income for fixed-rate mortgages; For ARMs, the existing mortgage payment(s) exceeds 31 percent of the borrowers gross monthly income as of March 1, 2008 OR the date of the new loan application.
  3. The homeowner did not intentionally default, does not have an ownership interest in other residential real estate and has not been convicted of fraud in the last 10 years under Federal and state law; and
  4. The homeowner did not provide materially false information (e.g., lied about income) to obtain the mortgage that is being refinanced into the H4H mortgage.

Original Cost of Program

  1. 3 percent upfront mortgage insurance premium and a 1.5 percent annual premium,
  2. Equity and appreciation sharing with the Federal government, and
  3. Prohibition against new junior liens against the property unless they are directly related to property maintenance.
  • The HUDS fact sheet gives full details.



Updated Hope for Homeowners Improvements

  1. Eliminates 3% upfront premium
  2. Reduces 1.5% annual premium to a range between .55% and .75%, based on risk-based pricing (also makes technical fix to permit discontinuation of fees when loan balance drops below certain levels, consistent with normal FHA policy)
  3. Raises maximum loan to value (LTV) from 90% to 93% for borrowers above a 31% mortgage debt to income (DTI) ratio or above a 43% ratio
  4. Eliminates government profit sharing of appreciation over market value of home at time of . Retains government declining share (from 100% to 50% after five years) of equity created by the refi, to be paid at time of sale or refi as an exit fee
  5. Authorizes payments to servicers participating in successful refis
  6. Administrative simplification:                                                                                                           (a) eliminates borrower certifications regarding not intentionally defaulting on any debt,                
    (b) eliminates special requirement to collect 2 years of tax returns,                                                  
    (c) eliminates originator liability for first payment default,                                                            
    (d) eliminates March 1, 2008 31% DTI test,
    (e) eliminates prohibition against taking out future second loans,                            
    (f) requires Board to make documents, forms, and procedures conform to those under normal FHA loans to the maximum extent possible consistent with statutory requirements.

Troubled Assets Relief Program (TARP)

The systematic foreclosure prevention and mortgage modification program under this section shall be a program established by the Secretary, in consultation with the Chairperson of the Board of Directors of the Federal Deposit Insurance Corporation and the Secretary of Housing and Urban Development, that—

  1. Provides lenders and loan servicers with certain compensation to cover administrative costs for each loan modified according to the required standards; and
  2. Provides loss sharing or guarantees for certain losses incurred if a modified loan should subsequently re-default.

Commitment of Resources

The comprehensive plan established pursuant to subsection (a) shall require the commitment of funds made available to the Secretary under title I of the Emergency Economic Stabilization Act of 2008 in an amount up to $100,000,000,000 but in no case less than $40,000,000,000.

In a press conference Tuesday, Federal Housing Finance Agency director James Lockhart said the program would target high-risk borrowers — those 90 or more days delinquent on their mortgages — and employ various modification strategies to get borrowers down to an “affordable” mortgage payment, defined as 38 percent of a household’s monthly gross income on a first mortgage payment.

Analysis of the results of the government-sponsored programs

The Office of the Comptroller of the Currency and the Office of Thrift Supervision reported on 2009-04-03

  • "Nearly one in four loan modifications in the fourth quarter actually resulted in increased monthly payments". This can occur when late fees or past-due interest are added to the monthly payment.
  • The redefault rate was about 50 percent where the monthly payment was unchanged or increased, and 26 percent where the payment was decreased.

Home Affordable Modification Program

Program Formed

February 18th, 2009

Home Affordable Modification Program, also known as HAMP, is set out to help up from 7 to 8 million struggling homeowners at risk of foreclosure by working with their lenders to lower monthly mortgage payments. The Program is part of the Making Home Affordable Program which was created by the Financial Stability Act of 2009. The program was built as collaboration with banks, services, credit unions, the FHA, the VA, the USDA and the Federal Housing Finance Agency, to create standard loan modification guidelines for lenders to take into consideration when evaluating a borrower for a potential loan modification. Over 110 major lenders have already signed onto the program. The Program is now looked upon as the industry standard practice for lenders to analyze potential modification applicants.

Eligibility Requirements of Program

The program abides by the following eligibility and verification criteria:

  • Loans originated on or before January 1, 2009
  • First-lien loans on owner-occupied properties with unpaid principal balance up to $729,750
  • Higher limits allowed for owner-occupied properties with 2-4 units
  • All borrowers must fully document income, including signed IRS 4506-T, proof of income (i.e. paystubs or tax returns), and must sign an affidavit of financial hardship
  • Property owner occupancy status will be verified through borrower credit report and other documentation; no investor-owned, vacant, or condemned properties
  • Incentives to lenders and servicers to modify at risk borrowers who have not yet missed payments when the servicer determines that the borrower is at imminent risk of default
  • Modifications can start from now until December 31, 2012; loans can be modified only once under the program 

Payments to Servicers, Lenders, and Responsible Borrowers

  • The Program will share with the lender/investor the cost of reductions in monthly payments from 38% DTI to 31% DTI.
  • Servicers that modify loans according to the guidelines will receive an up-front fee of $1,000 for each modification, plus “pay for success” fees on still-performing loans of $1,000 per year.
  • Homeowners who make their payments on time are eligible for up to $1,000 of principal reduction payments each year for up to five years.
  • The program will provide one-time bonus incentive payments of $1,500 to lender/investors and $500 to servicers for modifications made while a borrower is still current on mortgage payments.
  • The program will include incentives for extinguishing second liens on loans modified under this program.
  • No payments will be made under the program to the lender/investor, servicer, or borrower unless and until the servicer has first entered into the program agreements with Treasury’s financial agent.
  • Similar incentives will be paid for Hope for Homeowner refinances. 

Transparency and Accountability

  • Measures to prevent and detect fraud, such as documentation and audit requirements, will be central to the program.
  • Servicers will be required to collect, maintain and transmit records for verification and compliance review, including borrower eligibility, underwriting, incentive payments, property verification, and other documentation.
  • Freddie Mac is appointed the compliance officer of the program. 

Free Resources for potential applicants

There are free resources available for potential applicants.

  • The Federal government provides free resources to get you the help you need. Homeowners can call the Homeowner’s HOPE™ Hotline at 1-888-995-HOPE (4673) for information about the Making Home Affordable Program and to speak with a HUD approved housing counselor. Assistance is available in English and Spanish, and other languages by appointment.
  • is another free website where you may go to find a local counselor in your region.
  • is another web resource that will help provide you with a commitment free and comprehensive assessment to see whether or not you are potentially eligible. Currently is the only online resource that provides analysis in regards to all tests: debt to income ratios, net present value, and also factors in eligibility requirements.
  • also has many resources for you to check online. It allows you to compute estimated payments as well as has other resources. Making Home Affordable
  • Fannie Mae has a tool available where you can check to see if your loan is owned by Fannie Mae and thus potentially eligible for the program Fannie Mae Loan Look Up
  • Freddie Mac has a tool available where you can check to see if your loan is owned by Fannie Mae and thus potentially eligible for the program Freddie Mac Loan Look Up

Lender Participants

For a complete and updated list of lenders currently signed on you can visit the Making Home Affordable website List of HAMP Lenders

Warnings to people looking to apply for loan modification programs

Foreclosure rescue and mortgage modification scams are a growing problem. Homeowners must protect themselves so they do not lose money or their home. Scammers make promises that they cannot keep, such as guarantees to “save” your home or lower your mortgage, oftentimes for a fee. Scammers may pretend that they have direct contact with your mortgage servicer when they do not