WASHINGTON – Six of the nation’s largest loan servicers, representing 50 percent of the home mortgage market, were joined by federal officials in announcing a new anti-foreclosure initiative called Project Lifeline.
Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Wells Fargo & Co., Washington Mutual Inc. and Countrywide Financial Corp. all have agreed to participate in the private-sector effort, which U.S. Treasury Secretary Henry M. Paulson Jr. said “is just one of many steps which the Bush administration is encouraging as we work through this difficult period.”
“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,” Paulson said at the news conference. “We encourage all Hope Now servicers to adopt this new program,” he said. Project Lifeline’s six participating lenders all are members of the Hope Now alliance, announced in October, which Paulson said has grown from 60 percent to 94 percent of the subprime market.
“In some parts of our nation, the foreclosure crisis is having a devastating impact on neighborhoods and communities,” Floyd Robinson, head of Bank of America’s home-loan business, said according to Bloomberg News. But, he stressed, “homeowners can only take advantage of this program by taking action – they must respond when they hear from us.”
U.S. Housing and Urban Development Secretary Alphonso Jackson – whose comments at the 11:15 a.m. event focused on Federal Housing Administration efforts to move homeowners with adjustable-rate mortgages to more-affordable fixed-rate FHA loans – described Project Lifeline as a “responsible, timely effort” to reach distressed homeowners.
It offers a possible pause in the foreclosure process to borrowers who have fallen three months behind in mortgage payments. Eligibility includes those with prime, subprime and atypical “Alt-A” loans.
“Project Lifeline is aimed at homeowners who face a real risk of losing their home, but have not yet addressed the problem,” Paulson said. “Perhaps they are hoping to find a way to get current on their mortgage payments, or perhaps they don’t think any solution is possible. For whatever reason they have not yet taken action; our hope is that today’s announcement will reach them, and they will reach out immediately for help.”
Going forward, he said, “as our economy works through this difficult period, we will look for additional opportunities to try to avoid preventable foreclosures. However, none of these efforts are a silver bullet that will undo the excesses of the past years, nor are they designed to bail out real estate speculators. … These efforts are to help American families who both want to and can – through a loan modification or refinancing – stay in their homes.”
But, Paulson added, “I believe that our economy will continue to grow, although at a slower pace … and that it remains fundamentally diverse and resilient.”
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About 2 million homeowners nationwide face interest-rate hikes over the next two years as their adjustable-rate loans reset to higher rates, according to the Federal Reserve. The Federal Deposit Insurance Corporation estimates that rising interest rates and slumping home values may cause foreclosures to more than double this year to 1.6 million from the average 600,000.
“This is good, but we’ve seen this over and over again,” Kathleen Day, a spokeswoman for the Center for Responsible Lending in Washington, D.C., told Bloomberg News after the announcement. “The fact that they keep having to roll out subsequent rescue plans every few weeks underscores that each plan is inadequate.”
Additional information about Project Lifeline and today’s announcement, including the full statement issued by U.S. Treasury Secretary Henry M. Paulson Jr., is available at www.treas.gov. Information about the Hope Now mortgage servicers’ alliance is available from The Financial Services Roundtable at www.fsround.org.
