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Banking October 8, 2008, 12:01AM EST

IndyMac's Fast-Track Mortgage Modification Program

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In what's known as a "cash for keys" offer, IndyMac paid her $5,000 to surrender her home.

As word of its program has gotten around, IndyMac has been deluged with inquiries from borrowers looking to refinance on better terms, though it's debatable whether many of them are in need of assistance. One Washington (D.C.) woman telephoned senior FDIC officials as well as the top four IndyMac executives to badger them about lowering payments on an investment property. The bank postponed a scheduled foreclosure but hasn't agreed to renegotiate. "This is like triage after a train crash," says IndyMac spokesman Evan Wagner. "You take care of the worst cases first."

Bovenzi has plenty of experience in dealing with bad loans. An FDIC veteran, he worked at the agency during the savings and loan crisis of the late '80s and early '90s. One of the key lessons from that era: Debt workouts can pay off for lenders as well as for borrowers. Bair, in a Sept. 17 speech to Congress, noted that the FDIC's recovery rate on nonperforming loans averages just 32% of the loan's value. If the loan is current, the agency gets 87%.

It's too early to judge whether the IndyMac program will succeed. There are studies that show many loan modifications offer at best only temporary reprieves: Many borrowers will continue to fall behind on payments. Plus, there's no guarantee that whoever buys IndyMac will carry on with the program. Already several would-be buyers have visited its Pasadena headquarters to pore over the books. In the meantime, Bovenzi—who once headed an FDIC unit called the Liquidation Dept.—has been busy dumping assets. First to go were the season tickets to Los Angeles Dodgers game used to entertain corporate clients. A company-owned Porsche went for $65,000 on AutoTrader.com in August. Next

on the list: the paintings hanging on the walls.

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How Do You Spell Relief?

Valparaiso University law professor Alan White looked at 4,344 renegotiated subprime loans and found that only half of the modified loans resulted in lower payments. In many cases the amount owed actually rose as missed payments and late fees were added to the loan's principal. His conclusion: "The subprime crisis will be worked out only over many years."

To read White's study, go to http://bx.businessweek.com/mortgage-crisis.

Palmeri is a senior correspondent in BusinessWeek's Los Angeles bureau.

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