MercoPress. South Atlantic News Agency

“Project Lifeline” to help contain mortgage mess

Six major United States banks are taking part in an initiative to help homeowners struggling to pay their mortgages. Bank of America, Citigroup, Countrywide Financial, JP Morgan Chase, Washington Mutual and Wells Fargo are those taking part in “Project Lifeline”.

Backed by the US Treasury Department and Housing Department, people failing to pay their mortgages will have the foreclosure process halted for 30 days. It is hoped that more affordable payments can then be negotiated. Project Lifeline extends the current assistance available to holders of sub-prime mortgages to those with all forms of home loans. It will be available to those homeowners whose mortgage payments are 90 days or more, late. The six banks taking part in the project service almost 50% of the mortgages in United States. "Project Lifeline is a valuable response, literally a lifeline, for people on the brink of the final steps in foreclosure," said Housing and Urban Development Secretary Alphonso Jackson. He added that the aim was to provide a temporary pause in the foreclosure process "long enough to find a way out" by allowing homeowners and lenders to negotiate more affordable mortgage payments. Yet Treasury Secretary Henry Paulson cautioned that Project Lifeline would not be a "silver bullet". He said it was not designed to bail out real estate speculators, "or those who committed fraud during the mortgage process". Paulson described Project Lifeline as a targeted outreach to homeowners' 90-days or more delinquent that may lead to a "pause" in the foreclosure process. "This is an important new initiative, targeted to reach not only subprime borrowers, but all 90-day delinquent homeowners nationwide with a step-by-step approach to find individual solutions to individual problems". Bank of America president of consumer real estate, Floyd Robinson, said each case would be looked at individually. "We will look at each individual circumstance, homeowner to homeowner, and certainly be willing to do that if necessary," he said adding that in some instances his institution would be willing to forgive a portion of the mortgage by refinancing for a smaller loan amount if an owner owes more than the home is worth. The current sub-prime assistance plan is called "Hope Now". The banks say this has helped 545,000 sub-prime borrowers in the last six months of 2007. But this works out to 7.7% of 7.1 million subprime loans outstanding as of September. Among the subprime borrowers aided, 150,000 were helped through permanent-loan modifications, such as lower interest rates, while 395,000 negotiated repayment plans, which often involve a borrower getting back on track even after missing a few payments. Consumer groups, however, point out that many borrowers still can't keep up, even after loan workouts. They say many of the borrowers in the Hope Now effort have negotiated short-term loan modifications or repayment plans, which often involve a borrower getting back on track after missing a few payments. A full-fledged refinancing at a lower rate is preferable, they say.