Acquirers Told to Cut Borrowers Slack

The Federal Deposit Insurance Corp. urged institutions that split the costs of failed banks with the agency to cut some of their new borrowers a break.

The agency recommended that acquirers of failed banks under loss-sharing agreements with the FDIC on certain assets consider six-month forbearance plans for unemployed or underemployed borrowers. Under such a plan, an institution would lower a borrower's monthly payment to a level that "should allow for reasonable living expenses after payment of mortgage-related expenses," the FDIC said.

The agency, which consistently has pushed institutions to modify troubled loans to prevent foreclosures, said the reduction of monthly payments would not be viewed as losses under the loss-sharing agreement.

"This is a win-win for the borrower, who can remain in his or her home while looking for a new job, and the acquiring institution, which continues to receive payments on the loan," FDIC Chairman Sheila Bair said in a press release. "Ultimately, by reducing losses under our loss-share agreements, this approach helps reduce losses to the FDIC as well."

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