Let the modifications begin. IndyMac borrowers most seriously delinquent on their loans will be able to adjust mortgage payments under a plan just announced by the FDIC. The goal is to provide borrowers with affordable payments so they can stay in their homes. “Avoiding foreclosure not only strengthens local neighborhoods where foreclosures are already driving down property values, it makes good business sense," FDIC Chairman Sheila Bair said in a statement. By turning non-performing loans into performing loans, the FDIC might have a better chance of selling off IndyMac Bank - and at a better price. From CNN.com:

The FDIC is defining "affordable" loans as those in which the mortgage payment (including principal, interest, taxes and insurance) does not exceed 38% of a borrower's income. That debt-to-income ratio may be achieved in a number of ways, according to the FDIC: by reducing the interest owed on the loan, by stretching out the number of years over which the loan may be paid back or by principal forbearance, which defers payment on a portion of the original principal until the home is sold or the loan is refinanced. For IndyMac borrowers to qualify for an FDIC modification, they would have to show verification of income - most IndyMac loans are so-called Alt-A loans, which were given to borrowers with good credit but no proof of income. Borrowers would also have to verify that the home at issue is their principal residence.

In other encouraging bank news (well, kinda, sorta), L.A.-based mortgage lender FirstFed Financial has made 30 percent more loans in July than in June, and 166 percent more than in July 2007. The LAT's Scott Reckard says that's a big deal because the new loans are based on full-fledged documentation. In other words, they're actually looking at bank statements and calling employers! That's in contrast to the "liar loans" (no documentation, minimum payments) that had been given out by the bushel load.

The firm’s ratio of nonperforming assets to total assets, a key measure of dud loans, was 7.56% on July 31. That’s still extraordinarily high, and up from 1.01% a year earlier. But it was down noticeably from the 8.20% recorded at the end of June. Single-family loans delinquent by 60 to 89 days rose from $81.4 million to $101.4 million in the month. But newer delinquencies -- mortgages 30 to 59 days late -- edged down from $126.3 million to $123.4 million.