Across this country, borrowers on the brink are finally getting some help from an unlikely source: mortgage lenders.
Nearly one in six homeowners owes more on their mortgages than their home is worth, according to new numbers released by the Wall Street Journal on Wednesday.
Diane Smith, a Los Angeles mother of two adopted children with special needs, spent months in fear when she was told by her lender that her home would be auctioned.
"I've been terrified for six months," Smith said.
Two years ago, Smith re-financed her mortgage, hoping to use the extra money to fix the roof and the kitchen. Then her adjustable interest rate spiked just as the value of her home plummeted.
Smith couldn't afford the payments and, in this housing market, was unable to sell. And then this week, she received a phone call from an unlikely source: her bank, Indymac.
Indymac, which was taken over by the Federal Depositors' Insurance Corporation in July, decided to reduce the interest rate on her mortgage, from 7 percent to 4.8 percent, generating a savings of $1,749 a month.
"I thought, I could buy running shoes for my kids again," Smith said with pride. "And I could afford to buy milk for my kids again, because for the last five or six months I've had to borrow money to buy milk for my kids."
In August, FDIC officials began to deal with the 60,000 mortgages passed due that were held by Indymac. The lender launched a loan modification program, offering new terms and lower rates to more than 3,000 borrowers that have signed on to the program.
Amid intensifying political pressure that lenders are not doing enough to prevent foreclosure, a growing number of mortgage services are easing interest rates -- six times more often than just a year ago, according to Credit Suisse.
The $700 billion federal rescue plan encourages banks to adopt plans like IndyMac's, offering new terms for loan payments on those facing foreclosure.
For those banks and lenders, the loss incurred on the interest they're collecting is, for now, less costly than the effort it might take to sell a foreclosed home at a reduced price.
"In some cases, the length of the loan will increase, it depends on the circumstance," said John Bovenzi, CEO at Indymac. "This idea is to make the loan more affordable for the borrower so they can sustain payments and stay in their home."
The rate of foreclosures doubled from June of last year, according to RealtyTrac, an online market of foreclosure prosperities. The increase in foreclosure signals the growing number of homeowners who are struggling to make payments on their homes.
Those who have been making payments on their mortgages -- if only barely -- will not get a break on their interest rates.
It may seem unfair to reward those who failed to make payments, while leaving those who are paying out in the cold, but Bovenzi defended Indymac's program.
"If you live in a house and foreclosure signs are going up around you, it is hurting your property value," Bovenzi said.
On Monday, Bank of America agreed to reduce interest rates on up to 400,000 mortgages nationwide.
While there is no clear-cut solution to solving the mortgage crisis, the loan modifications offered by IndyMac and others have been a step in the right direction to make loans affordable and more manageable for borrowers.
Since Monday's announcement, Bank of America will have more than 5,000 employees assigned to re-work mortgage loans, making the kind of calls that Diane Smith desperately waited for.