Foreclosure Freeze – Project Lifeline Housing Relief Plan Announced

February 12, 2008 – Henry Paulson, US Treasury Secretary, announced the Project Lifeline plan that would give 30 days of relief to housing borrowers facing foreclosure. The six top mortgage lenders joined Paulson in the effort to prevent borrowers from falling into foreclosure.

Project Lifeline is a measure that will broaden and improve outreach efforts to distressed borrowers. Project Lifeline is supported by Bank of America, Citigroup, Countrywide, JP Morgan Chase, Washington Mutual and Wells Fargo. All six mortgage lenders are a part of HOPE NOW alliance, a group working to help borrowers avoid foreclosure. The HOPE NOW alliance encourages homeowners needing help to call their mortgage lender.

Project lifeline will put a 30 day freeze on the foreclosure process. This added time frame is needed to give lenders the opportunity to consider each borrower’s situation to determine if a lower payment is possible. Lenders will contact homeowners that are 90 or more days late on their mortgage payments and freeze the foreclosure process while a loan modification, or mortgage refinance, is considered.

The Federal Reserve has predicted that over two million borrowers face higher rates in the next two years as their mortgages reset even higher.

Project Lifeline is the latest Bush administration response to the ongoing housing mortgage crises. Lenders earlier pledged to freeze rate increases on subprime loans for up to 5 years. This latest program is a significant expansion of preventing foreclosure because it covers all classes of borrowers, including prime borrowers.

Some critics said the measure falls short of what is needed to address the growing housing foreclosure problem. “A month long moratorium on mortgage foreclosures is like a band-aid when the patient really needs surgery,” said AFL-CIO president John Sweeney. Senator Dick Durbin, a democrat from Illinois, has proposed legislation that would permit borrowers facing foreclosure to alter the terms of their mortgages in bankruptcy proceedings to make their payments more affordable, a solution that current law does not allow.