Tuesday, February 12, 2008

Some Good News, We Hope: Feds to Unveil New Mortgage-Help Plan

From: http://ap.google.com/article/ALeqM5iPpplpVSr2ixU2laMGwo2QnmANHQD8UOMNB80

By MARCY GORDON – 3 hours ago
WASHINGTON (AP) — 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. The plan, called Project Lifeline, will be announced Tuesday by the Treasury Department and the Department of Housing and Urban Development, said a person familiar with the plan who confirmed earlier news reports about the plan but spoke on condition of anonymity because it had not yet been made public.
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.
On a pilot basis, the plan will involve six of the largest mortgage lenders, in hopes that more lenders will sign on. The participants are Bank of America Corp., Citigroup Inc., Countrywide Financial Corp., JPMorgan Chase & Co., Washington Mutual Inc. and Wells Fargo & Co.
All six are involved in Hope Now, an effort the Bush administration brokered with the mortgage industry late last year to freeze rates on some high-cost subprime mortgages for five years to aid borrowers whose teaser rates are jumping sharply higher. Since then, Treasury Secretary Henry Paulson has urged lenders to expand that effort to cover struggling homeowners with conventional mortgages.
The new plan applies to seriously delinquent homeowners, those whose mortgages are 90 days or more past due.
With home prices falling, even some people with good credit have gotten behind on their payments. Like many subprime borrowers, they signed up for adjustable-rate mortgages that allowed them to make smaller, steady payments for several years until a higher fluctuating interest rate kicked in.
Some borrowed against their rising equity as home prices climbed, assuming they would be able to refinance or sell their homes before the higher payments began. But as prices have plummeted, many homeowners now owe more than their home is worth, and banks have tightened their lending practices, leaving even people with stellar credit struggling with higher payments.
The Hope Now alliance, which includes lenders, investors and nonprofit groups, said last week that it helped nearly 8 percent of subprime borrowers in the second half of 2007 — more than its original estimate.
The group said it helped 545,000 subprime borrowers with spotty credit in the second half of last year, compared with its January estimate of 370,000. That works out to 7.7 percent 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.


From: http://online.wsj.com/article/SB120276908653960265.html?mod=googlenews_wsj
Lenders Step Up Effort to Avert Foreclosures
By DAMIAN PALETTA and JAMES R. HAGERTYFebruary 12, 2008; Page A3
Prodded by the Bush administration, six major mortgage lenders are due to announce today a stepped-up effort to rescue homeowners on the brink of foreclosure.
Under the latest plan, dubbed Project Lifeline, the lenders promise to seek contact with homeowners who are 90 or more days overdue on their mortgages. In some cases, homeowners will be given the chance to "pause" their foreclosure for 30 days while lenders try to work out a way to make the loans affordable. Lenders could begin sending letters to these borrowers as soon as this week.
Homeowners wouldn't qualify for the program if they are in bankruptcy, if they already have a foreclosure date within 30 days or if the loan was for an investment or vacant property.
Unlike the plan announced in December to freeze interest rates at current levels on certain adjustable-rate loans, this latest effort is to involve all kinds of home loans, not just subprime mortgages, a higher-cost variety for people with blemished credit records or high debt in relation to income.
The participating banks, which service about half of the U.S. mortgage market, are Bank of America Corp., Citigroup Inc., Countrywide Financial Corp., J.P. Morgan Chase & Co., Washington Mutual Inc. and Wells Fargo & Co. -- all members of the so-called Hope Now Alliance. They are working with the U.S. Treasury and Department of Housing and Urban Development. Those two departments scheduled a briefing on the plan for 11:15 a.m. today. The plan was reported yesterday by the Reuters News Service.
Almost immediately after the Bush administration announced the freeze plan in December for certain subprime borrowers, Treasury Secretary Henry Paulson indicated an interest in developing a strategy to address a broader range of distressed homeowners.
At least 1.3 million home-mortgage loans were either seriously delinquent or in foreclosure at the end of the third quarter, according to the Mortgage Bankers Association. Not all of those loans would qualify for the program, however.
Analysts at the investment-banking firm Lehman Brothers recently estimated that the number of foreclosures will surge to one million this year and next, about four times the 2007 level.
Some nonprofit groups that work with troubled borrowers say lenders have become more flexible in recent months in efforts to find ways for more borrowers to keep their homes. But they also say the industry needs to do more.
Martin Eakes, chief executive of the Center for Responsible Lending, a nonprofit research group based in Washington that frequently bashes the mortgage industry, said moves announced so far have been "baby steps." He said lenders should move more aggressively to reduce loan balances to current home values and make monthly payments affordable. He acknowledged, however, that servicers of loans -- the firms that collect payments and handle foreclosures -- face the risk of lawsuits from investors that own loans if those investors believe borrowers have been given overly generous terms.
Bruce Marks, chief executive of Neighborhood Assistance Corp. of America, a Boston-based nonprofit that works with distressed homeowners, dismissed Project Lifeline as a "PR stunt." He said it already should have been automatic for loan servicers to pause foreclosure proceedings for homeowners seeking to qualify for a more affordable loan.
Congressional Democrats also have grown increasingly hostile toward the Bush administration and lenders over the past several months, arguing that not enough is being done to prevent foreclosure. Mr. Paulson is scheduled to testify before the Senate Banking Committee Thursday, and Project Lifeline could help blunt criticism from lawmakers.
The latest initiative came as Countrywide announced a plan to work with the Association of Community Organizations for Reform Now, or Acorn, to seek alternatives to foreclosure for distressed borrowers.

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