RENEE MONTAGNE, host:

And throughout this financial crisis, one of the most complicated issues has been whether to modify mortgages for borrowers having trouble with payments. The failure of IndyMac Bank this summer has given federal regulators an opportunity to experiment with that. Since July, IndyMac has been run by the Federal Deposit Insurance Corporation, or FDIC. So far it's managed to strike new deals with 3,500 homeowners to reduce their payments. NPR's Yuki Noguchi reports on the benefits and complexities of keeping people in their homes.

YUKI NOGUCHI: Cynthia Hendrix and her family ended up near foreclosure literally by accident. In 1997, Hendrix hurt her back in a car accident and had to quit her six-figure accounting job.

Ms. CYNTHIA HENDRIX: We had a really nice life. We went on really nice vacations. And you know, all that changes pretty quickly when you lose your job.

NOGUCHI: In the decade since, Hendrix, her husband, Tom, and their two children faced a litany of medical mishaps: knee replacement, severe infections, a broken jaw, back surgery. They filed for personal bankruptcy and sold their nice coastal New Jersey home. With their new bad credit scores, they got a subprime loan on the small ranch house where they live now.

Ms. HENDRIX: The goal was always within two years to improve our credit score, improve our credit rating, pay down some of these bills, and be able to get into a fixed-rate mortgage at a decent interest rate, you know. And that just never happened.

NOGUCHI: Originally they'd hoped to tear down the house and rebuild a new one. But most of their $150,000 in annual income goes towards medical bills, so their home remains in serious disrepair. Drawers and cabinet doors are missing, the door to the garage is rotted, and the thermostat hangs from a hole in the wall.

Ms. HENDRIX: We leave it like that because if you try and fix it, it doesn't work right.

NOGUCHI: For years, they've gotten letters warning they face foreclosure.

Ms. HENDRIX: Here I have one from IndyMac Bank from December of 2007. The mortgage is in serious default because you have not made the required payments.

NOGUCHI: Then in August, they got another letter, this time in a Federal Express package. It offered to lower their interest rate by three and a half percentage points, a move that would lower their payments from $4,300 a month to $2,600.

Ms. HENDRIX: I felt like it was a gift from God. I was in shock, I couldn't believe that they were going to actually reduce my interest rate, and it would remain that way. And it was like a lifesaver.

NOGUCHI: The Hendrix case is, as mortgage workouts go, a best-case scenario. For one thing, to qualify for IndyMac's program you have to be more than two months behind on your mortgage payments. And the bank must have all your financial information, including proof of employment and income, in order to offer a deal. If you meet the criteria, you get a new offer. Cindy McGovern manages the IndyMac call center that handles the calls about mortgage workouts. Loan officers counsel people to cut cable TV or cancel their credit cards. Still, she says many are too deep in the hole and are told, sorry, we can't help you.

Ms. CINDY MCGOVERN (Manager, IndyMac Call Center, Austin, Texas): It is definitely not a moral situation. It's definitely, you know, business driven. But those stories do tug, you know, at your heart string.

NOGUCHI: When she first got the offer, Hendrix read it over and over again. It seemed too good to be real and far too generous to pass up.

Ms. HENDRIX: It was just such a winning situation for everyone, no matter what I did, what I had to do, whether I had to sell, or beg, borrow, or whatever, I was going to make that payment, you know. And I made that payment on September 15.

NOGUCHI: Outside her house Hendrix surveys the peeling pain and says she might be able to afford some repairs next spring. And for the first time in 10 years, she says she plans to start saving.

Ms. HENDRIX: My next paycheck, I'll start putting money in my 401(k) again. My husband just increased his 401(k). So now we'll be able to contribute to the economy, where if we were to go in foreclosure, you know, no one would benefit.

NOGUCHI: Hendrix says the last decade was full of humiliating experiences with creditors. She got through it on the hope, she says, that if she just tried her best to pay it off, maybe something good would happen. Yuki Noguchi, NPR News.

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