(snip)"The WSJ has another update: FDIC Plan Tests Limits of Leniency
The new entity, called IndyMac Federal Bank, has become a laboratory test of whether the FDIC's program can keep people in their homes. While it has already seen some success, the agency has also run into obstacles familiar to private lenders and loan servicers. The upshot: there are no easy solutions to the foreclosure crisis.
...
The agency found plenty of bad loans to work with. IndyMac's specialty was Alt-A mortgages, a category that frequently includes loans made with little or no documentation and exaggerated borrower incomes.
...
[T]he FDIC has sent letters to ... 19,000 borrowers for whom it had no recent financial information. It asked them to get in touch with IndyMac and provide financial information to determine if they qualify for a fast-track modification. So far, just 10% have responded, less than what the FDIC would like to see.
Is anyone other than Sheila Bair surprised that so few borrowers responded? These were called 'liars loans' for a reason!"(snip)

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More consequences of 'moral hazard'. Why should anybody want to refinance a mortgage they cannot afford in order to eventually own a property that will be worth far less than they paid for it ? Why should the FDIC assume that deadbeat homeowners will be able to afford the payments on a refinanced subsidized mortgage just because they are 20-30-40% lower than the original mortgage payments ( i.e. many 'subprime' mortgages started out with early mortgage payments being interest only or negative amortization) ?

And this is especially so if federal and state 'subprime homeowner' assistance laws prevents the lender from evicting the deadbeat homeowner (meaning that they are able to live in the home essentially rent-free making no additional mortgage payments at all for as long as the gov't prevents the lender from evicting them) .