FDIC

The FDIC just issued a special edition of its Consumer News, focused on managing your money in good times and bad. In addition to offering useful tips for borrowing wisely, protecting against fraud, and spending less, the newsletter recommends tips for saving and in particular, creating an emergency savings fund. To read these and other suggestions, click here.

Consumer News was created is to provide reliable and timely finance advice to consumers, and the FDIC is looking to share this resource more widely.  To subscribe to Consumer  News yourself, go here.

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As 2008 draws to a close, over 2 million families have already lost their homes or are facing foreclosure. Many homeowners in need of relief are wondering if help will be on the way anytime soon.

"We are doing everything we can to be responsible," said Aoah Middleton, who started missing mortgage payments when her five-year-old daughter was diagnosed with cancer in 2006, to the New York Times. "Banks are getting helped. Rich people are getting helped. Why isn't there anyone to help me?"

As policymakers struggle for solutions to revive the economy, FDIC Chairman Sheila Bair has stood out in the search for creative policy decisions to keep people in their homes. She's been called "the consistent voice of reason" by CNN, adding that she has "loudly and courageously... thrust the corrosive issue of foreclosure to center stage."

Join us this Wednesday, December 17^th, for what promises to be a stimulating discussion with Chairman Bair. The event will also feature groundbreaking research from the Center for Community Capital at The University of North Carolina that provides a roadmap for making responsible homeownership work, especially among lower-income families.

Discussants will include Eric Stein (President, Center for Community Self-Help), Mark Willis (Visiting Scholar, Ford Foundation), Reid Cramer (Research Director, Asset Building Program), and Ellen Seidman (Director of Financial Services Policy, Asset Building Program).

In the midst of all the market turmoil, one innovative program to deal with the underlying housing and mortgage issues is moving ahead smartly.  You will recall that, fast upon the heels of its takeover of IndyMac, the FDIC announced an aggressive program to modify loans owned or serviced by IndyMac to prevent avoidable foreclosures.  Initially, the FDIC wrote almost 5,000 borrowers and proposed to modify their loans and reduce their payments-all they needed to do was send back a check in the new payment amount, sign a modification agreement, and grant permission to check the borrower's tax return. (Where the tax return information does not conform to information in IndyMac's files, the FDIC requires further verification of borrower income.)  One of the best aspects of the program for borrowers is that the letter they received included a specific new payment amount, not just an invitation to call their servicer.

The Federal Deposit Insurance Corporation (FDIC) insures bank deposits up to $100,000 per individual per bank. But, in the second quarter of 2008, only 63% of bank deposits were insured leaving $2,574bn in uninsured deposits in US banks. As faith in the financial system slides, some fear that a failure to put in place a larger guarantee on deposits could result in a run on banks. The revised bailout bill the Senate is voting on tonight includes a measure to temporarily increase insurance on deposits from $100,000 to $250,000.

Snapshot asks, if the new bailout package fails, will depositors lose more confidence and pull their uninsured deposits?

FDIC - Quarterly Banking Profile Q2 2008
Bloomberg - FDIC Seeks Authority to Raise Deposit Insurance Limit
IMF - Deposit Insurance and Crisis Management
Roubini - Roubini Sees `Silent' Run on Banks

This afternoon FDIC Chairman Sheila Bair and her team took the next important step in making good on their promise to treat borrowers whose loans are held or serviced by IndyMac as the Chairman has urged other banks to treat their borrowers. Simply put, the FDIC announced a blanket loan modification program, under which the loans of borrowers in default or having trouble making their mortgage payments will be automatically modified into fixed rate loans whose terms will be set so that housing debt consumes no more than 38% of the borrower's income.

Saturday's Washington Post carried an article with the hopeful headline "Credit Unions Slowly Fill Void as Payday Lenders Leave D.C."  In January-before Ohio enacted its anti-payday lending law, before the Arkansas Supreme Court interpreted that state's laws to effectively ban payday lending-the District of Columbia capped interest rates on short-term loans at 24%.  That meant that traditional payday lending was out of business.

While the article's headline was hopeful, what followed showed the difficulty these bans face.  Credit unions are indeed trying to fill the gap, not just in the District, but nationally.   And the Federal Deposit Insurance Corporation (FDIC) has a small-dollar loan pilot underway with 31 banks around the country (although none in the District).