IndyMac is one of the many hard-luck banks that was deeply involved in subprime mortgages and because of that it was about to go bust a few months ago when FDIC, the Federal Deposit Insurance Corp., swooped in and took control of it. In the following weeks FDIC did more, though, than just guarantee depositors' money. At the urging of its Chairman Sheila Bair the agency and IndyMac formulated an ambitious home loan work-out program and are now testing it.

At the core of the operation is the desire to save the FDIC money on foreclosures now in IndyMac's books. To get there really isn't rocket science either. The loan terms are modified so that the monthly payment will become reasonably manageable to the borrower. To qualify, borrowers must prove sufficient income and have to be at least 60 days behind in payments.

IndyMac has to give up some of its yield that is considered less costly than letting homes go into foreclosure that normally has a steep price tag. Thus far about 4,000 homeowners have received rewritten mortgages and their savings on average are $430 per month. In addition, IndyMac has already mailed out 15,000 letters to distressed homeowners with an offer to modify their loans.

Many banks are now carefully watching how this IndyMac experiment plays out and could adopt it soon to stem losses from still rising foreclosures. Countrywide, recently acquired by Bank of America, is currently implementing a program much like it on the heels of a legal settlement it agreed to with several states. Even the U.S. Treasury and congressional Democrats are now starting to lean towards a solution along those lines.

It sure looks like the momentum is gathering steam to add this type of an approach to the original bailout plan that so heavily favored the banking sector. It has a good point, too. Actually two points. First, it appears to save banks money directly. Second, when people stay in their homes the values in the neighborhoods stabilize and should a home here and there be foreclosed, the price the bank can get for it is still halfway decent.