Payday Loans News Break: FDIC Bails Them Out | Credit Repair for Mortgage Lenders

The Paulson Plan has provided relief for floundering banks in America, but the help mortgage lenders have sought for their own credit repair hasn’t been forthcoming. Until now.

The FDIC has announced its home loan modification program

With this new plan, the Federal Deposit Insurance Corp will seek to prevent about 1.5 million homes from facing foreclosure. In order to encourage mortgage lenders to refinance certain homeowners’ mortgages, the FDIC has promised to absorb some of the losses.

It is estimated that the FDIC’s plan will cost somewhere in the neighborhood of $24.4 billion, and the funds will be taken from Paulson’s $700 billion financial industry bailout plan, aka the Troubled Asset Relief Program (TARP) (Which are gigantic payday loans that don’t have to be paid back).

FDIC Chairman Sheila Bair had been trying to get early versions of this plan past President Bush for weeks, but this plan that passed muster came just a couple of days after Paulson dismissed the idea of government underwriting failing mortgages.

What’s the difference – how does it help repair credit?

Paulson said that Bair’s foreclosure plan is a subsidy (spending) program, while his TARP program is “investment, not spending.”

Here is the language of the FDIC’s plan. Their reasoning in the matter is as follows:

Although foreclosures are costly to lenders, borrowers and communities, the pace of loan modifications continues to be extremely slow. It is imperative to provide incentives to achieve a sufficient scale in loan modifications to stem the reductions in housing prices and rising foreclosures.

In addition to saving around 1.5 million homes from foreclosure and alleviating the need for consumer  payday loans, 2.2 mortgage loans would receive aid in the form of financial incentives to the lenders. $1,000 would be paid to lenders to cover the cost of modified mortgages. If a loan defaults, up to 50 percent of the loss would be shared by the FDIC.

Treasury Interim Assistant Secretary Neel Kashkari said this to the U.S. House of Representatives:

We continue to aggressively examine strategies to mitigate foreclosures and maximize loan modifications, which are a key part of working through the necessary housing correction and maintaining the strength of our communities.

In closing, here’s a funny look at some “magic math” that has gone on during this mortgage crisis:

This is something the U.S. government has been working on for a while, and their efforts won’t stop with this initial wave of credit repair. If your finances are struggling you can always apply for payday loans to help make ends meet.