The Federal Deposit Insurance Corp.'s experiment in modifying loans at IndyMac Bank is still showing good results in terms of keeping borrowers in their homes with a low redefault rate of less than 16%.

The Pasadena-based thrift failed in July 2008. As receiver, FDIC developed an innovative loan modification program to reduce the mortgage payments of delinquent borrowers down to 38% of their income.

Starting in early 2009, monthly payments were reduced to 31% of mortgage DTI on new modifications.

Overall, the weighted average payment reduction is 24% per loan. The bulk of the modifications were completed in the fourth quarter of 2008.

As of May 31, the redefault rate on nearly 17,400 FDIC modifications was 15.6%.

The redefault rate on most loan modifications completed in the fourth quarter was 27% as of March 31.

Most servicers in the fourth quarter did not emphasize the importance of reducing the borrowers' monthly payments and only 37% of loan mods resulted in payment reductions of more than 10%.

Unless the payments are reduced, "you are almost guaranteeing a redefault," a FDIC official said.

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