NEW YORK (CNNMoney.com) -- Six of the nation's largest mortgage lenders have temporarily stopped foreclosure proceedings, it was announced Tuesday, in a joint effort to cool the raging foreclosure crisis.
Under a new program, called Project Lifeline, all legal efforts to oust seriously delinquent borrowers from their homes will be postponed for 30 days. During that time lenders and borrowers will try to work out payment options on a case-by-case basis.
Project Lifeline will not be confined to borrowers with adjustable rate mortgages (ARMs), according to the prepared remarks of Alphonso Jackson, Secretary of Housing and Urban Development (HUD), that accompanied the announcement of the program.
ARMs have recorded the highest rates of delinquencies but defaults for loans of all types have risen dramatically over the past couple of years.
"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 Jackson.
The lenders already on board are Citigroup (C, Fortune 500), Countrywide (CFC, Fortune 500), Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Washington Mutual (WM, Fortune 500) and Wells Fargo (WFC, Fortune 500); more may sign up if Project Lifeline meets with success. The program was put together with the backing of Jackson, Treasury Secretary Henry Paulson and Faith Schwartz, director of Hope Now, the government-backed, foreclosure prevention coalition.
During the temporary moratorium, foreclosure prevention specialists will examine individual cases to see if there's a good possibility that, through some kind of loan modification or repayment plan, borrowers will be able to regain their footing, start paying their mortgage again and remain in their homes.
For lenders, repossessing homes has become an increasingly unprofitable venture. As real estate markets have turned, many at-risk mortgage borrowers are upside-down, owing more on the loan than their home is worth. Foreclosing on such properties means taking a bath when the house is resold, especially factoring in maintenance, legal, tax, realtor commissions and other costs.
Recent reports indicate the average foreclosure results in an average loss of more than $50,000 for the lender. It's cheaper to work out a deal with defaulting borrowers.
The moratorium idea has been raised before. "Many people have been calling for a moratorium on foreclosures," said John Taylor, CEO of the National Community Reinvestment Coalition. "I look on it as a good thing."
Last April, civil rights groups, noting that minorities were bearing the worst impact of the foreclosure crisis, called for a six month halt in foreclosure proceedings. In May, the California Reinvestment Coalition, a community advocacy group, lobbied state legislatures for a similar, state-wide plan. This past December, Senator Clinton went on record supporting a 90-day halt.
Jim Rokakis, treasurer of Cuyahoga County in Ohio, which has been hard hit by foreclosures questioned the initiative. "Does this mean you're going to do it again in 120 days?" he asked. Subprime resets will peak again in the spring and Hope Now's effort includes notification of resets 120 days in advance.
"If they really want to make an impact they will require mandatory counseling before foreclosure can be completed. If you can't do it, you can't foreclose," Rokakis said.
As the foreclosure crisis deepened -- there were more than 2.2 million foreclosure filings in 2007, according to RealtyTrac, the online marketer of foreclosure properties - government forces and industry players expanded the scope of prevention efforts.
Secretary Jackson sees the program as one more step in a multifaceted approach to meeting the foreclosure crisis. Project Lifeline will supplement such efforts as FHASecure, which is refinancing many adjustable rate mortgage borrowers into government insured fixed rate loans; the rate freeze, brokered by the Treasury Department, a five-year suspension of interest rate increases for many at-risk, subprime ARM borrowers; and the provisions of the economic stimulus package that increase cap limits for loans eligible for purchase by Freddie Mac and Fannie Mae that should lower borrowing costs for many home owners in high-cost areas.
"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. See Also
No comments:
Post a Comment