Can The FDIC Really Stop Foreclosures?
November 19, 2008
In an effort to keep the economic system from getting any worse, the Federal Deposit Insurance Company (FDIC) has unveiled a plan to prevent 1.5 million homes from going into foreclosure by offering to share the losses that lenders typically experience when they refinance a home. According to FDIC chairwoman Sheila Blair, the $24 billion price tag for the plan would be financed with the money from the $700 billion bailout plan.
The plan still has some hurdles to overcome. For instance, Treasury Secretary Henry Paulson has dismissed it as a “subsidy or spending program” and said that the bailout is “investment, not spending.” However, the FDIC is moving forward with its plan and has posted the outline of the plan on its website.
The intent of the plan is to make mortgage modifications more attractive to lenders. Historically it’s been nearly impossible to get a mortgage lender to voluntarily renegotiate the terms of a mortgage. Why? Because the homeowner typically interacts solely with the mortgage servicer - the company that collects payments. The servicers work under strict agreements with the owners of the loans, and there is typically very little they can do on their own.
The FDIC plan comes shortly after fears within the mortgage servicing companies of a 90-day federal moratorium on foreclosures. The fears expressed by lenders involve the very thing the FDIC hopes to minimize: the losses incurred when loans are renegotiated.
The FDIC plan is now nothing more than a proposal, and one with obstacles to overcome. However, it does represent hope for some homeowners.
But if you’re having problems paying your mortgage, don’t wait for the FDIC plan to go into action. Remember - even if the plan goes into action you may not qualify for their assistance.
Be proactive. Contact a qualified foreclosure attorney who can help you work through your foreclosure problems.
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