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Mod Out of the Box: Mortgage Modifications for Main Street

March 23, 2009

By Kevin Petrasic and Azba Habib

The current mortgage market meltdown has spawned a host of political and regulatory actions. With foreclosures still rising and home values falling to levels not seen in a generation, there is tremendous pressure for creative and effective solutions to help affected homeowners. For a number of political, policy and practical reasons, the governments tool of choice for dealing with at-risk borrowers is loan modification. While loan modifications have been used in varying degrees by institutions for more than a year, it was not until the failure of Indymac Bank (Indymac) in July 2008 that the approach became firmly rooted as a viable programmatic, long-term strategy to deal with troubled borrowers. The reason for this, of course, is the Federal Deposit Insurance Corporations (FDIC) implementation of its Mod in a Box program in the aftermath of the Indymac failure. Since then, loan modifications have come to the forefront and are manifest in a number of different programs and proposals.