Bair lets latest foreclosure wrinkle slip

While we focused on Sheila Bair’s update to IndyMac Federal’s loan modification program, the FDIC chairman also let fly in Congressional testimony today with a few sentences that foreshadow what may be yet to come under TARP:

The statute grants authority to the Secretary of the Treasury to use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures. Loan guarantees could be used as an incentive for servicers to modify loans. Specifically, the government could establish standards for loan modifications and provide guarantees for loans meeting those standards. By doing so, unaffordable loans could be converted into loans that are sustainable over the long term. The FDIC is working closely and creatively with Treasury to realize the potential benefits of this authority.

Think Hope for Homeowners, but without the strings attached. BusinessWeek’s cover this week spelled capitalism with a K, and this is part of the brave new world in mortgage lending and servicing, too.

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