Wednesday, August 13, 2008

Pay-off HELOC get 2% bonus

We all know the FDIC took over IndyMac. They have been implementing various changes. An article today titled FDIC slashes estimate of IndyMac's uninsured deposits from the LA Times mostly focuses on uninsured accounts. However the last two paragraphs are perhaps the most interesting. First the HELOC related paragraph -

IndyMac is offering holders of home equity credit lines a rebate of 2% of their line of credit’s maximum, up to $1,500, if they pay off their unpaid balance and close down their line of credit. IndyMac has 27,000 such customers, Bovenzi said. (note - bold in original)
This seems like a very low incentive. Even though savings are being hit there are still many places an investment can make over 2%. Plus one wonders how many people actually utilized their HELOCs but still have that type of money laying around to pay off the lines. Perhaps there are a few people who will think they are getting a deal.

So now onto the very interesting paragraph about foreclosures -

The bank has followed through on promises from FDIC Chairwoman Sheila Bair to stop foreclosure proceedings for owner-occupied homes pending a review of whether the loans can be modified to mutually benefit the borrower and the FDIC. More than 60,000 borrowers with loans serviced by IndyMac are 60 or more days behind on payments, according to Bovenzi, who said he would provide more details on the modification program soon. (note - bold in original)
This is a huge decision. Hopefully people will remember in a few months when the reports come out that 60,000 foreclosures were stopped from the FDIC to workout the loans. Notice that the numbers will dip a bit just before the election. Interesting.

A few quick questions - How many of these loans really have any potential of being reworked? Will any real numbers of reworked loans every be revealed? How many of these owner-occupieds are really owner-occupied? Oh stupid question, no one ever lied on their mortgage application.

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