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Important Update: Changes in FDIC Deposit Insurance Coverage

The FDIC deposit insurance rules have undergone a series of changes starting in the fall of 2008. As a result, certain previously published information related to FDIC insurance coverage may not reflect the current rules. For details about the changes, visit Changes in FDIC Deposit Insurance Coverage. For more information about FDIC insurance, go to www.fdic.gov/deposit/deposits/index.html or call toll-free 1-877-ASK-FDIC (1-877-275-3342). For the hearing-impaired, the number is 1-800-925-4618.

Spring 2007

Attention ARM Borrowers: Contact Your Lender Before Higher Payments Put Your Home at Risk

Homeowners with adjustable-rate mortgages (ARMs) who are not able to make their monthly payment when the interest rate goes up should contact their lenders as soon as possible to discuss their options. That is among the main messages from the FDIC and other banking regulators for the millions of borrowers who have ARMs with very low payments in the early years of the loan that will sharply increase when interest rates reset.

Defaulting on a home loan means you can lose your home. The lender has the right to foreclose – to sell your home to raise money to pay off your debt – if you default. You would also severely damage your credit record, making it more difficult to borrow money or get a job or insurance in the future. Consider these steps to avoid that result.

Ask about refinancing or restructuring: While many lenders and loan servicers (companies that accept borrower payments and help administer escrow accounts) are writing or calling customers who face big rate increases about the possibility of refinancing or restructuring their loans, "I would encourage borrowers who anticipate having difficulty making payments to take the initiative and seek assistance even if they have not been contacted," FDIC Chairman Sheila C. Bair told the House Financial Services Committee on April 17, 2007. (Read the prepared statement)

That same day, the FDIC and other federal regulatory agencies issued a statement encouraging financial institutions to "work with homeowners who are unable to make mortgage payments," by modifying loan terms or moving borrowers from variable-rate loans to fixed-rate loans that may be available at a lower monthly cost.

Before contacting your lender, consider getting help but beware of scams: The regulators also said that borrowers who are delinquent on their mortgage loans should consider getting help from a housing counselor. These are public and private organizations that offer advice and assistance on everything from buying and financing a home to dealing with debt problems, including avoiding foreclosure if the borrower misses loan payments. Some counselors assist consumers by working with lenders on their behalf, but it's always important for the borrower to be actively involved in this process.

The FDIC and fellow regulators suggest these resources for finding a reputable housing counselor:

The Department of Housing and Urban Development (HUD) maintains a list of approved housing counselors who give advice free or at low cost. To locate a HUD-approved counselor in your area, call 1-800-569-4287 or go to www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm.

NeighborWorks America, a national nonprofit organization created by Congress, and HOPE for Homeowners, a service of the nonprofit Homeownership Preservation Foundation, have established a toll-free hotline at 1-888-995-HOPE (4673). Callers can receive immediate free advice and support from nonprofit, HUD-certified organizations 24 hours a day, 7 days a week. Callers who need additional assistance will be referred to reputable local counselors. For more information, start at www.995hope.org.

The FDIC and other government agencies also want consumers to be aware of credit-repair scams that target homeowners having serious problems making their mortgage payments. In one example, phony companies claiming to be housing counselors promise to help negotiate a new loan or perform other services for a hefty fee that is collected up-front. The companies actually do nothing at all or perform services consumers can do for themselves at little or no cost. Turning to a HUD-approved counselor for assistance is one way to avoid these types of fraud.

For more help or information if you're facing problems paying your mortgage: See the HUD Website "How to Avoid Foreclosure" at www.hud.gov/foreclosure/index.cfm. Also read FDIC Consumer News online at www.fdic.gov/consumernews for a variety of tips on money management, including how to shop for a mortgage (in the Summer 2005 edition and other issues).

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Last Updated 05/08/2007

communications@fdic.gov