A new mortgage help plan coined “Project Lifeline” was unveiled today by the Treasury Department and the Department of Housing and Urban Development.
The plan will assist borrowers who are 90 days or more past due on their mortgage, and will not be limited to high-cost subprime mortgage holders like previous plans targeted.
Borrowers with prime loans, Alt-A mortgages, fixed-rate loans, and second mortgages will also be eligible for assistance under the new plan.
Project Lifeline will allow seriously delinquent homeowners to delay foreclosure proceedings for 30 days while lenders attempt to work out new terms to avoid one.
“For many families, Project Lifeline will temporarily pause the foreclosure process long enough to find a way out. Loan modifications may follow. And, this program is not only available to subprime borrowers but to people with any kind of home mortgage,” said HUD Secretary Alphonso Jackson.
“There’ll be homeowners who still take no action and some will still walk away,” Treasury Secretary Henry Paulson said. “But some borrowers facing immediate foreclosures may find solutions.”
Letters will be sent out to homeowners more than 90 days behind on their mortgage, at which point the homeowner has 10 days to respond and provide additional financial information so the lender is able to determine new mortgage payment options.
It will initially involve major mortgage lenders like Bank of America, Citigroup, Countrywide, JPMorgan Chase, Washington Mutual and Wells Fargo, on a pilot basis.
The move comes as banks and lenders continue to take on huge losses related to the recent rise in foreclosure proceedings.
The plan is intended to supplement efforts already in place via programs like FHASecure and Hope Now, which offer some solutions to homeowners but leave many others with few places to turn.
“The sum total of these actions is a powerful correction to the downward spiral of the housing market. It will lead to a reversal of misfortune, saving homes and equity, providing necessary sanity and salvation for many families on the brink of foreclosure,” said Jackson.
It’s good to see that government officials are finally realizing that it’s not just a subprime crisis, but rather a complete overhaul that is needed.