The fight to stave off more foreclosures just got a much-needed idea! This past Friday, FDIC Chairwoman Sheila Bair revealed her strategy to assist 2.2 million borrowers’ secure new loans and ultimately help 1.5 million people keep their homes.

The proposal suggests that delinquent homeowners would get a much-needed shift in the amount of their mortgage payments. Those who are two months or more past due would have their payments shifted to a more manageable 31% of their gross monthly income under the terms of their new loans.
Additionally, the plan offers not only a financial incentive of paying loan providers $1000 for reworking mortgages, but also a strategy of the government sharing the financial burden that has previously scared off lenders from rolling up their sleeves and pitching in to help. Bair suggests that the government would take a 50% responsibility of the losses if a borrower taking advantage of the assistance defaults.

A similar plan has already been in effect — Bair has been using this strategy with IndyMac, the failed mortgage lender the FDIC took over in mid July. Although there are currently other proposals on the table, Bair has hoped that this one would be the winner.
The main differences between Bair’s plan and the current government options are that there would be no reduction of principal amount owed, and compensation would be allotted for the lenders who jump on board. Although the hopes were that lenders would join forces with the government and help out suffering homeowners, that $1000 cash bump could certainly assist them in a change of “heart” and subsequently, mortgage terms.