Project Lifeline: Will It Work?
Henry Paulson, Secretary of the Treasury of the United States, announced last week the Bush Administration's latest plan for helping homeowners struggling to save their houses from foreclosure.
Project Lifeline, which is targeted at homeowners who are at least 90 days past due on mortgage payments, is not actually a government-run effort. It's a statement of intent from six major mortgage lenders. The lenders have basically agreed to give those who are 90+ days late on mortgage payments a break from foreclosure proceedings.
In a statement, Paulson described the 30-day break as a "pause" from foreclosure. During that time, the targeted group is expected to contact and be contacted by lenders and mortgage brokers to work out a new payment plan. Paulson mentions in his statement that Project Lifeline is intended for those who have not yet taken any foreclosure-prevention actions.
But, like Bush's earlier anti-foreclosure measure, HOPE NOW, Project Lifeline has drawn criticism from many corners.
An article in Business Week calls the latest anti-foreclosure plan a "hands off" approach that will likely amount to too little, too late. Specifically, the article notes that, as an agreement between privately-run enterprises, Project Lifeline cannot be as effective as government intervention would be.
Lending institutions like those involved (Bank of America, Wells Fargo, Citigroup, JPMorgan Chase, Countrywide Financial and Washington Mutual) are, at the end of the day, businesses. And that means they're looking out for their bottom lines above anything else.
Plus, according to sources, most of the lenders involved in the agreement were contacting delinquent lenders and suggesting loan modification or workout plans before Project Lifeline made these efforts official. From the lenders' point of view, that makes the most financial sense: banks don't want to foreclose on lots of houses and then have to worry about selling them in a bad market. They'd rather get money from preexisting loans.
Evidently, the banks are aiming for as much transparency and clarity as possible in their lending and refinancing procedures.
But reports from Reuters question whether or not 30 days is a long enough period to be very useful for homeowners seriously delinquent on their loans.
The Treasury Department's statement concerning Project Lifeline focuses mainly on statistics from the HOPE NOW initiative, and addresses Project Lifeline only briefly. Paulson notes that he is "eager" for lenders to adopt the provisions of the Project, but offers no incentives or requirements for them to do so.
Hope for Potential Foreclosure Victims?
Though the current administration has not yet succeeded in solving the puzzle of the housing market, hope remains for struggling homeowners.
Changes to bankruptcy law proposed by Senator Richard Durbin (D-IL) would allow bankruptcy courts to modify the terms of a mortgage loan, which could help people stay in their homes if passed into law.
The Center for American Progress, too, has suggestions for how to help American families fighting to keep their homes. In a proposal to Congress, spokespeople for the CAP outlined a plan that would attack the foreclosure crisis with a two-pronged approach.
First, federal government organizations Fannie Mae and Freddie Mac would purchase mortgage securitization pools for a discount price and sell fixed-rate, traditional loans to families. The new loans would be affordable and free of tricky adjustments like those currently costing so many borrowers so much money and grief.
Second, the CAP plan would provide non-profit organizations and local governments with funding to buy vacant, foreclosed properties in neighborhoods, fix up those properties and rent them to families in need of a place to live.
While these proposed solutions are still in their early development stages, the fact that such fixes are being hammered out should come as a relief to those losing faith in the current efforts aimed at relieving foreclosure-related distress.
For updated news and information about the foreclosure crisis, be sure to check Foreclosure-Fighter often.