As rampant unemployment sours the mortgage industry, the Federal Deposit Insurance Corp. is “encouraging” its partner banks to do more to help borrowers troubled by job losses or underemployment.

In a press release last week, the agency called on banks that acquire the FDIC’s failed institutions to drop mortgage rates for half a year or more for borrowers whose livelihoods have been ravaged by the economic recession.

“This is simply good business, since foreclosure rarely benefits lenders and would cost the FDIC more money, not less,” FDIC Chairwoman Sheila C. Bair said. “With more Americans suffering through unemployment or cuts in their paychecks, we believe it is crucial to offer a helping hand to avoid unnecessary and costly foreclosures.”

Banks that acquire failed institutions with the help of the FDIC already have to carry out the standards of the agency’s Mortgage Loan Modification program for the failed institution’s assets. That program provides for the modification of qualifying loans with a variety of measures, including cutting a borrower’s monthly housing debt-to-income ratio.

But the FDIC’s new proposal would go further, mandating that banks offer at least six months of forbearance to qualifying borrowers. The FDIC would not cover lost mortgage revenue under its loss-sharing agreements, which means banks might grow reluctant to extend such a potentially unprofitable form of aid to homeowners. It could also deter some banks from becoming loss-sharing partners with the FDIC.

Nonetheless, Bair and the FDIC remained optimistic that many institutions would heed the agency’s advice.

“This is a win-win for the borrower, who can remain in his or her home while looking for a new job, and the acquiring institution, which continues to receive payments on the loan. Ultimately, by reducing losses under our loss-share agreements, this approach helps reduce losses to the FDIC as well.”

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