From Homescape

written by Amy Le on Friday, February 15, 11:32AM

Amy Le

More help is on its way for homeowners falling behind on their mortgage payments — that is, if the lenders can find the troubled borrowers. 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, coined Project Lifeline, was unveiled on Tuesday by the U.S. Treasury Department and the Department of Housing and Urban Development. But critics argue that with nearly 575,000 homeowners fitting the profile at the end of the third quarter, it’s unclear how many will be saved.

Absentee participants
While the new initiative could lower high mortgage payments for the distressed homeowners and keep them in their homes, historically, seriously delinquent borrowers have been hard to reach. USA Today reports that “half of homeowners who lose their property through foreclosure never had any contact with their lender or servicer.” Lenders typically contact borrowers via mail or phone. Project Lifeline officials said borrowers eligible for the program will be notified by mail and will have 10 days to contact their loan servicer or housing counselor. Home owners are instructed to call the toll free number, 888-995-HOPE.

A recent survey of bank loans officers by the Federal Reserve suggest that an obstacle for lenders will be keeping delinquent borrowers from tossing over their keys to homes worth less than the balance of their mortgage. Sheila Bair, chairman of the Federal Deposit Insurance Corp., said lenders will have to start writing down principal on some loans.

Extension of HOPE NOW
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.

In cases where lenders think a workout plan may be a better alternative than foreclosure, pending foreclosures will be suspended for up to 30 days while a review process is undertaken and a more affordable payment plan is drawn up, according to Treasury Department officials. Borrowers who are approved for a workout plan that lowers their monthly payments will have their loan terms formally modified if they can prove they’re able to meet the new terms by making payments for three consecutive months.

All six lenders participating in the new initiative are also involved in the HOPE NOW alliance program, an effort the Bush administration brokered with the mortgage industry late last year. The program freezes rates on some high-cost subprime mortgages for five years to aid borrowers whose teaser rates are jumping sharply higher. With foreclosure rates continuing to skyrocket in many large housing markets across the country, government officials have been urging lenders to more quickly expand their efforts in helping struggling homeowners with their mortgages. Some critics argue the lenders have already arrived a bit too late to the party.

Got hot local housing tips or a story you want to share? Contact Amy Le at openingdoorsblog@homescape.com 

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