Introducing Project Lifeline, wherein:
At-risk borrowers with all types of mortgages, not just high-cost subprime loans, could be eligible for help under a new plan involving six big home lenders.
Against a backdrop of surging defaults and administration officials’ prodding of the mortgage industry, the plan will allow seriously overdue homeowners to suspend foreclosures for 30 days while lenders try to work out more affordable loan terms.
All together now: Second verse, same as the first.
Though the full details have yet to be revealed, this program, like Hope Now, appears to be mostly window dressing with PR level value and political cover provided by the Fed’s involvement.
12:45p Update: More details now, from Marketwatch:
The program is not a solution to the housing crisis but is considered a "pause" in the foreclosure process, giving homeowners an extra 30 days to work out a payment or modification program…
The program gives the lenders more time – and presumably a better chance — to work through the volumes of troubled loans they face. Many have indicated that they simply don’t have the manpower to handle all the business.
The program is open to borrowers not already in foreclosure of prime loans, second liens and home-equity loans as well as the Alt-A and the subprime loans
The help is not available to owners of investment or vacant properties. "If you can’t afford to live in a home you will go back to being a renter," Paulson said.
…borrowers could begin receiving letters from their lenders as soon as this week.
What, no 800 number?
Update 2, 2:15p: More, via Interest Rate Roundup:
The program will begin by servicers sending a letter to seriously delinquent homeowners. This program reaches all loans, Prime, Alt a, Subprime and second liens. The servicers will reach out to homeowners with the following straightforward steps that may qualify them for a loan modification:
1. Call your mortgage servicer
2. Tell the servicer you received a letter, you want to stay in your home and you are willing to seek counseling, if necessary
3. Provide updated financial information so the servicer can explore a suitable solution
4. If appropriate, any pending foreclosure will be ‘paused’ for up to 30 days during the review process until a formal decision is made and a plan is created
5. If a workout plan is established and the homeowner follows the plan for three consecutive months, their loan will be formally modified as they have demonstrated their ability to meet the requirements"
Loan workouts and modifications are complicated, take time, and are uniquely unsuited for any sort of catch-all program, so what’s really happening here is business as usual (albeit in a time with unusually high delinquencies and pressure from all flanks to "fix" the problem.) Lenders can and do take exactly the steps above without any sort of masterstroke polciy initiative from up on high, so this program buys time to wade though it all. Doubftul that 30 days will be enough for many.
In many ways this was inevitable, since the delinquency and foreclosure problems have long since slipped the surly bonds of the sub-prime market.
Feds to Unveil New Mortgage-Help Plan [AP]