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Delinquent Homeowners Get a New "Lifeline"

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Six of the big mortgage companies involved the Hope NOW Alliance announced that the Alliance is expanding its efforts to help homeowners facing foreclosure.

The rate freeze program announced by President Bush in December applied only to borrowers who were facing resets on subprime adjustable rate mortgages but who were current, in fact had never been delinquent, on their mortgage payments.

The new program dubbed Project Lifeline extends earlier Hope NOW efforts to include those who are seriously delinquent whether their problems are with subprime, Alt A or prime loans and will even assist those in foreclosure with second mortgages or home equity lines.


The new program was announced in a press conference Tuesday morning at the Treasury Department. Treasury Secretary and Department of Housing and Urban Development Secretary Alphonse Jackson along with Bank of America representative Floyd Robinson and Home Now Alliance Executive Director Faith Schwartz presided.

Lifeline will be, at least at first, a joint effort by six of the largest mortgage servicers in the country; Bank of America, Wells Fargo, Citigroup, Washington Mutual, J.P. Morgan Chase, and Countrywide Mortgage. These six represent 50 percent of the U.S. mortgage market. There are another 19 services that are members of Hope NOW and Secretary Paulson expressed a strong desire to have them sign on to the new program.

Borrowers who appear to qualify for help will receive letters from their mortgage servicers notifying them of the program and their possible eligibility. These borrowers, who will be at least 90 days behind in payments, must contact the servicer within 10 days of receiving the letter and inform the servicers that they are interested in the program, that they are willing to participate in counseling if required, and they must provide financial information to the servicer. If the loan appears salvageable, the homeowner will be granted a 30 day "pause" in the foreclosure process to allow time for a loan modification or other resolution.

Bank of America's Robinson said that the evaluation of a borrower's situation will address the entire picture including credit card and other debt and will be transparent so the borrower knows exactly what is happening with the foreclosure and his loan.

Robinson and Schwartz recapped some of the activities of Hope NOW since it was set up to facilitate contact between troubled homeowners and those who might help them.

The hotline is now handling over 4,000 calls a day, up from 625 at its start, and there are 400 housing counselors working for Hope NOW. The organization has sent out 775,000 letters to borrowers in the last three months and has a 16 percent contact rate but hopes that this will improve as the program receives more publicity. An additional 200,000 letters are going out each month. 870,000 borrowers have been helped with their foreclosure situation and over one-half million of these have been subprime borrowers. Loan modifications doubled in the fourth quarter of 2007 over the third quarter.

One reporter asked how borrowers who are "upside down" in their loans would be treated. Would Bank of America for example, be open to writing down a loan to reflect the current market value of the home, thus forgiving that amount of debt? Robinson said he could not speak for the other servicers but that Bank of America would look at this kind of solution on a borrower-by-borrower basis.

Another reporter asked how many borrowers Project Lifeline was expected to help but Secretary Paulson refused to speculate saying that it would be up to the individual servicers to determine that number but that there would soon be a reporting system in place so that these kinds of questions can be answered.

Paulson stressed that not all borrowers can be helped by Project Lifeline or any other program. There will be some who simply refuse to make contact or who walk away from their homes and those whose financial situation makes it impossible to keep their homes "and we cannot help those who refuse to honor their obligations. But Project Lifeline has the potential to offer new solutions to responsible, able homeowners who want to keep their homes."



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Comments (11)

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This is directed first to Lory. Probably the reason you were not approved for a loan modification, is that you don't show enough income to catch up, and set up a new payment, which is higher. To me, it would seem simple to just lower the interest rate, but they don't seem to do that. I negotiate short sales with banks. Some are easy to work with, and some are very difficult. Each short sale negotiator usually has at least 200 files they are working on at the time. I have a lot to say about the inefficiency of the lenders. But, talk about heart attacks...the people working in these departments must have the highest stress job in the U.S. They are not the cause of any of it, their corporate policies are. They are just employees, getting the brunt of anger from both sides. It is hard to believe I am defending bank employees, when one just screamed at me like she was a 14 year old.

Above Posted By: Kathleen | Sun, 30 Mar 2008 17:12:42 EST

We tried to work with our lender as soon as we got the letter stating that our monthly mortgage payment will increase $700. We faxed everything that was needed,letter explaining why we cant afford to pay the new amount. But 4 moths and several minor heart attacks later we were told that our request for loan modification was denied. Even after we submitted detailed expense report it shows that we only have $50 left at the end of the month.We asked why we were not approved, the rep said that Chase's investor will not approve our request. Even though we can barely make the payments, we were current which is actually a bad thing. We knew someone that was in the same situation as we are but defaulted on their payment and yet they got approved for modification. Yeah, we were foolish to think that we will be able to refinance after 2 years but we are responsible people.Its funny how banks will not give us the refi because there is not enough equity in house and adviced us to talk to our lender which we did but turns out, their so called investors decides wether we will have a place to live or not. Great job corporate america!

Above Posted By: Lory, CA | Wed, 19 Mar 2008 20:21:32 EST

Bailout, Rate Freeze, Project Lifeline, whatever label you put on it doesn't matter. First of all, there are 2.2 million homes forcasted to go into foreclosure in the next 2 years. At only $250,000/home that's $550 Billion. What effect will a $20 B bailout proposal by Bush accomplish? What will any program accomplish unless they start talking numbers that reach 1/2 Trillion dollars - and that ain't likely to happen. So, in all probability what will happen then? Like it or not the market will have to correct itself. But why is this so bad. No one complained when housing was going up 10, 20, 30% a month. Why is it so hard to believe that housing will drop by 15 - 25% as forcsted by the end of 2009. That modest decline is nothing compared to the run-up over the last few years. Personally I think that housing will see at least a 35 to 45-% drop to bring it back into alignment with incomes. Even with the recent decline in home prices we are still at historical highs when compared to incomes - and really, isn't that what determines how much house a person can afford. And for those that are losing money on their recent investment (house) well that's too bad, but bite the bullet and move on. If I borrow $250,000 to invest in stocks and the market heads south and my investment is now only worth $200,000 do you think any bank, government or anyone else would give me a bailout - NO. Why not, why would my investment be treated any different than your (house) investment. It shouldn't. I've made money in the past and lost money in the past investing and I know going in that that is a risk I take. House buyers know the same is true. You know why realtors sell homes instead of houses? Houses are boxes that sit out in the rain and rot, homes are places where you raise a family. The worst is yet to come in this housing market - there are fortunes to be made and lost - what side you are on is entirely your choice.

Above Posted By: Anonymous | Mon, 3 Mar 2008 16:54:38 EST

As a Realtor in the trenches, I have nearly 20 short sale listings at this moment an I'm now more of a counselor than anything else. I hate being put in this position but, no one is willing to help these people. We have come to the perfect storm and the tsunami of foreclosures will begin to cripple our country for decades to come. We need people representing the banks that have common sense and not just sweep it under the rug like the government is doing now. No one seems to want to make decisions here. I could prevent 20 foreclosures from happening if I can just talk to someone with a decision making capability to speak to me on behalf of the bank. All I need is five minutes for each case and I can prove to them that they will lose LESS money. . if they see the facts and accept my help to sell the house now and also help this people from ruining their credit. Why ruin families lives when a common sense approach that benefits the bank can be accomplished so easily???? I'm going crazy on the phone trying to talk common sense.. . and the only response I get is "Marissa" telling me that she can transfer me to a voice mail and they will get back to me in a 100 years. . CAN SOMEONE HELP?????

Above Posted By: Fernando Herboso | Sun, 17 Feb 2008 09:04:10 EST

I guess there is more to Monopoly than a board game.

Above Posted By: Jake | Wed, 13 Feb 2008 11:39:27 EST

I agree that the Lifeline Project is simply a bandaid. I don't think the foreclosure problem is going to be fixed unless lenders are willing to refinance the homes at the original loan amount or current value, whichever is less, at a reasonal rate. If the payment is still uncomfortable for the homeowner, at least the homeowner has the option of selling the home in a reasonable period of time. Has anyone noticed how the lenders drag their feet on the short sales. 90days + is the average response time on a short sale contract. More importantly, though, the lender needs to allow a dialogue before the home loan payments are delinquent. There are many people who don't know which way to turn because they are struggling to the make the payment to secure their credit, and yet know that the house is no longer worth what they paid for and for all intense purposes will not have the value for a very long time. If the situation as is continues, no one will be able to buy a home because of credit issues no matter how high FHA sets their loan limits. We will become a country of tenants.

Above Posted By: Trish Sublette | Wed, 13 Feb 2008 11:10:19 EST

This is truly a mess of biblical proportions. I'm looking for a way to salvage my son's life. He has a fixed first and second/ 30 year loan interest only at huge interest rates. Like other naive young couples, they counted on refinancing when the home value increased. The house is in Las Vegas and has dropped in real value more than the value of the second. I'm going to recommend that he work with the first mortgage holder to get the second to walk and take his pain now. Failing that, file for bankruptcy and start over. The value of the home will not recover in a decade. Lenders better wise up to this and start answering phone calls. The new program is another band aid. Why wait 90 days before they start talking? The second should take a token payment and write it off. No morality or obligation posts please ala Paulson. This isn't personal - it's business. It's the right thing to do.

Above Posted By: Coop | Wed, 13 Feb 2008 09:36:58 EST

Project Lifeline was announced to bring some humor into our lives. Currently this program already comes under the mitigation process. If you are having trouble making your payment, you eventually get to talk to the mitigation department to see what can be worked out. They ask you what got you behind in the first place, then they want to know know what has been done to resolve the situation. They ask about your finances and send you a worksheet to fill out on income and expenses. They want to know if you are going to be able to make payments based on these figures. Our loan servcing company has been very nice regarding our mortgage loan and have tried to figure out away to work it out. The bottom line is that we have a change in income, the value of the house is less now and they want to tack on $30,000 ( missed payments) on to the end of the loan. This will also increase our payments. This is not a workable solution for us. They need to at least go back to our original amount we owe and lower the interest rate and bring us current. We both need to start over and get back on track. So, with Project Lifeline it's really no different and really no help and definetly nothing NEW Do they think we are that stupid? We need real solutions!

Above Posted By: Diana Bell | Wed, 13 Feb 2008 08:09:33 EST

Instead of being a responsible homeowner I should have stopped paying my mortgage months ago. Had I know someone was going to bail me out for buying more house than I could afford I would have bought in a better neighborhood.

Above Posted By: Anonymous | Tue, 12 Feb 2008 19:04:32 EST

What matters most is how many homeowners will be helped.

Above Posted By: Michael Campanaro | Tue, 12 Feb 2008 18:58:44 EST

I want to know specifically what loan modifications will be done during this "pause." Additionally, if subprimes get their rates frozen, what help is going to be given to the primes who have lost jobs and need help also.

Above Posted By: Walker | Tue, 12 Feb 2008 15:23:56 EST


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