IndyMac Federal Bank will implement a program to help delinquent borrowers modify their mortgages, the Federal Deposit Insurance Corp. said Wednesday.

The program will help the Pasadena, Calif.-based mortgage lender and thrift, seized by federal regulators in July after its capital levels became inadequate, turn distressed mortgages into performing loans in hopes to avoid foreclosures, according to the FDIC's Web site.

The modification plan, which will initially help more than 4,000 borrowers, will also maximize value for the FDIC and improve returns for IndyMac's creditors and investors in securitized mortgages, the FDIC said.

"This is a well balanced program that will maximize the value of these loans, ultimately returning more money to uninsured depositors and creditors, along with investors in the servicing portfolio," FDIC Chairman Sheila Bair said in prepared remarks on Wednesday. "At the same time, we hope to keep tens of thousands of troubled borrowers in their homes and avoid the negative consequences that foreclosures can have on the broader economy."

The FDIC took over IndyMac on July 11 after determining it was "unlikely to be able to meet continued depositors' demands." It was one of the largest bank failures in U.S. history.

The loan modifications will be available for most borrowers who have a first mortgage on their primary residence owned or securitized and serviced by IndyMac and is "seriously delinquent" or in default, according to the FDIC. IndyMac will also work with other consumers who are unable to pay their mortgages because of payment resets or "changes in the borrowers' repayment capacities," the FDIC said.

Under the program, interest rates for eligible mortgages would be capped at 6.5%. The modifications would be designed to achieve sustainable payments at a 38% debt-to-income ratio of principal, interest, taxes and insurance, through a combination of interest rate reductions, extended amortization and principal forbearance, according to the FDIC.

IndyMac will initially send roughly 4,000 modification letters to troubled borrowers. In the coming weeks it will send thousands more, the FDIC said.

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