IndyMac held its first workshop this Saturday and was overwhelmed by the number of homeowners with delinquent mortgages who attended. The bank had mailed out nearly 4,000 notices to distressed home owners notifying them of the workshop, which it had labeled “Home Preservation Day.”

Organizers assumed 200 people would attend, but were overrun when nearly 2,000 distressed homeowners showed up, according to the Los Angeles Times. Only 300 were able to meet with counselors, and only 100 qualified for loan modifications.

Let’s Do the Math

I’m a big believer in numbers. You can torture them, but they’ll never lie.

• 4,000 Number of IndyMac homeowners who are delinquent on their mortgages

• 2,000 Number of IndyMac homeowners who attended “Home Preservation Day”

• 1,700 Number of attendees who were turned away

• 300 Number of attendees who met with a counselor

• 100 Number of attendees who had their home loan modified

So, What Does This Mean

• 2.5% of the homeowners received loan modifications

• 67.7% of delinquent homeowners failed to qualify for loan modifications

If you extrapolate these trends, 2,667 out of 4,000 IndyMac delinquent homeowners will have their homes foreclosed upon unless the FDIC (which seized control of IndyMac) changes the qualification criteria.

How This Affects You

The IndyMac/FDIC plan is the most likely blueprint for restructuring loans going forward. Two lessons can be learned. First, more than half of homeowners who are facing foreclosure will fail to qualify for loan restructuring.

Second, there is going to be a deluge of homeowners seeking assistance, and the banking industry lacks the infrastructure and resources to process all of the requests.

As a practical matter, you will probably need to spend a fair amount of time fighting through the bureaucracy. Some people are good at that, and have the time and patience.

Your other choices are to work with

• a not-for-profit group

• a paid foreclosure counselor, or

• an attorney.

At this point, the situation is fluid and changing on a weekly basis, so there is no wrong approach.

Mortgage giants Fannie Mac and Freddie Mac, which were seized by government regulators earlier this year, announced plans this week to suspend foreclosures during the holidays. So, from now through January 9, 2009, the agencies will neither foreclose on home loans nor modify home mortgages.

Approximately 16,000 households will be affected.

It’s not hard to see how this one evolved: Government bureaucrats faced with a daunting amount of work – modifying 16,000 mortgages – decided to:

(a) Keep working hard so that distressed homeowners would have relief in time for the holidays, or
(b) Take an extended vacation.

One more sign that we are slowly turning into….France.

Fannie & Freddie to Restructure Home Loans

Fannie and Freddie will restructure home loans for homeowners who are at least three months behind on their mortgages. Under the loan modification plan, payments on mortgages, including principal, interest, taxes and insurance, will be set at 38% of a borrower’s monthly pretax income.

The lesson here is:

• Stop paying your mortgage so you qualify for the program,
• Lower your income – drop that second job, stop working OT, etc. to lower your monthly payment, and
• Start telling your kids that the best jobs are in government.

Failed IndyMac bank, which is being run by the FDIC, announced plans to hold in-person counseling sessions through Neighborhood Housing Services of Los Angeles, a not-for-profit group.

The two scheduled sessions are as follows:

• Saturday, November 22, 2008 at the Van Nuys Civic Center, from 10 a.m. to 3 p.m.
• Saturday, December 6, 2008 in Riverside at a location to be announced.

The bank is mailing notices to more than 4,000 homeowners who are behind on their mortgage payments. Homeowners who are not behind on their home loans may attend, but shouldn’t expect much assistance.

IndyMac to Restructure Loans

IndyMac intends to restructure loans, setting payments at approximately 38% of the borrower’s income, extending the loan term, and in some cases not charging interest on some portion of the principal.

Homeowners should bring the following documents to the meetings:

• Documents verifying income, such as pay stubs, W2s, 1099s and tax returns,
• A list of other assets owned (i.e. cars, real estate, etc.) and documents supporting such ownership, and
• A list of monthly expenses (i.e. utility bills, food & clothing expenses, car payments, etc.) and supporting documentation.

Borrowers can get more information by calling (877) 908-4357.

Keep Your Crib Recommendation

If you are behind on your mortgage payments to IndyMac, we suggest that you take the initiative in restructuring your loan.

You can do this by:
• Contacting the bank directly,
• Contacting Neighborhood Housing Services for counseling services,
• Attending one of the two scheduled public sessions, arriving early, or
• For the most immediate results, hiring an attorney who specializes in restructuring foreclosures.

Kudos & Props

IndyMac/FDIC should be commended for taking aggressive action to help distressed homeowners.

Doghouse

The FDIC is picking up the tab because many of the IndyMac loans never should have been made in the first place. The FDIC and other regulatory agencies should have done more to prevent bad loans from being made in the first place.

And Don’t Forget Who is Picking Up the Tab

You are. The FDIC is financed by charges to banks, which in turn pass the charges on to consumers. That’s you, dude.