The Federal Deposit Insurance Corp.'s chief watchdog recommended improvements in the agency's loan-modification program to align it more with the administration's program for workouts.
Starting with loan-modification standards implemented at the failed IndyMac Bank, the FDIC has required failed-bank acquirers to comply with the program in order to receive claims under loss-sharing deals with the agency. Generally, modifications must produce a greater value than a foreclosure would, and a monthly payment not exceeding 31% of a homeowner's gross monthly income.
The February report by the FDIC's inspector general said failed-bank acquirers subject to the eight-largest shared-loss deals as of August had completed just over 4,300 modifications, and had almost 6,500 in process. The report was released Wednesday.
The report suggested that the FDIC strengthen the program to make it more consistent with the Obama administration's Home Affordable Modification Program, which made $75 billion available to promote loan workouts. Specifically, the IG said the FDIC could improve the agreements with failed-bank acquirers for complying with the agency's program, the program's underwriting and reporting requirements and how assuming institutions monitor and detect fraud in loan modifications.