In a major move, the nation’s leading servicers and lenders of subprime loans have announced a plan to help delinquent borrowers.
The group, made up of loan servicers and lenders responsible for nine out of 10 subprime loans, has agreed to hold on foreclosure proceedings for up to 30 days as a well to help delinquent borrowers come up with an alternative.
The initiative, called Project Lifeline, was created to assist people 90 days or more behind on mortgage payments. It was announced last week.
The lenders are:
· Bank of America
· Citigroup
· Countrywide Financial Corp.
· Chase
· Washington Mutual
· Wells Fargo
In the plan, eligible borrows will have the option to modify the loan with new terms in order to catch up on payments.
The lenders are also members of the HOPE NOW coalition, created by the Treasury Department to accelerate the process of modifying subprime adjustable-rate mortgage (ARM) loans before interest rate resets. While HOPE NOW members had been focused on modifying subprime ARM loans, Project Lifeline is targeted at nearly all loans, including prime, alt-A, and second-lien mortgages.
In a press release, the Project Lifeline initiative will include every member of the HOPE NOW coalition — an additional 19 lenders and loan servicers.
Borrows who are seriously delinquent with the member lenders may receive letters notifying them of the program. They will need to call their mortgage company or broker within 10 days, agree to participate in financial counseling and provide financial information.
A loan that is 90 days or more delinquent is eligible for Project Lifeline unless the borrower is in active bankruptcy, if a foreclosure sale date is less than 30 days away, or if the home is an investment property or vacant.
Information about the HOPE NOW and Project Lifeline programs is available online at www.hopenow.com or by phone at (888) 995-4673.
Banks will halt foreclosure proceedings to give lenders time to work out delinquency solutions. It’s the latest attempt to tackle the housing crisis.
By Les Christie, CNNMon
NEW YORK (CNNMoney.com) — Six of the nation’s largest mortgage lenders, in a joint effort to cool the raging foreclosure crisis, have agreed to temporarily stop foreclosure proceedings on homeowners who have fallen seriously behind in their house payments.
Under a program unveiled Tuesday, legal efforts to oust seriously delinquent borrowers from their homes will be postponed for 30 days while lenders and borrowers try to work out payment options.
The effort, known as Project Lifeline, will not be confined to borrowers with adjustable rate mortgages. So-called ARMs have recorded the highest rates of delinquencies, even as default 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,” said Alphonso Jackson, Secretary of Housing and Urban Development. “This program is not only available to subprime borrowers but to people with any kind of home mortgage.”
The banks so far participating in the program 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).
Project Lifeline 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.
Paulson said the effort won’t be a magic bullet.
“There’ll be homeowners who still take no action, and some will still walk away,” Paulson said. “But some borrowers facing immediate foreclosures may find solutions.”
Throwing homeowners a lifelineUnder the program, homeowners 90 days or more behind in their mortgages will get a letter from their lenders asking them to call. Borrowers will be asked if they want to stay in their homes; if so, they will be offered financial counseling.Loan modifications are not automatically granted. Borrowers will have to provide up-to-date information about their wages and debts. At that point, the lenders decide whether to pause the foreclosure process.
During the moratorium, foreclosure prevention specialists will determine if there’s a good possibility that a loan modification will work. In other words, will a borrower be able to regain his footing and start paying his mortgage again?
Any loan modifications - such as lowering interest rates, balances or both - will be provisional. After homeowners make payments on time for three months, the changes to the terms of loans will become permanent.
For lenders, repossessing homes has become an increasingly unprofitable venture. As real estate markets have turned down, many at-risk mortgage borrowers are upside-down - meaning they owe more on their loan than their home is worth.
These days, lenders often lose money when they foreclose on and resell properties - an average of $50,000 per home. It’s cheaper to work out a deal with defaulting borrowers.
Reaction: Applause and questionsThe moratorium idea has been raised before.“Many people have been calling for a moratorium on foreclosures,” said John Taylor, chief executive 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, statewide plan. This past December, Sen. Hillary 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 - more than 2.2 million foreclosures were filed in 2007, according to RealtyTrac, an online marketer of foreclosure properties - government forces and industry players expanded the scope of prevention efforts.
Jackson, the HUD secretary, said that Project Lifeline is just one effort to tackle the mortgage crisis. He cited FHASecure, which is refinancing many adjustable rate mortgage borrowers into government insured fixed rate loans; a five-year rate freeze, brokered by the Treasury Department, for many 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.
“The sum total of these actions is a powerful correction to the downward spiral of the housing market,” said Jackson.
Still, the nation’s housing crisis is deep and unlikely to ease up soon.
“In terms of subprime, the worst is just beginning,” said Treasury Secretary Paulson. “The loans resetting over the next couple of years - that vintage was done under the most lax underwriting standards.”
ey.com staff writer
February 12 2008: 4:46 PM EST
Cox Announces Statewide Foreclosure Forums Contact: Rusty Hills or Matt Frendewey, Media Contacts
Agency: Attorney General
January 23, 2008 LANSING - Following up on the nation’s most widely attended mortgage foreclosure forum in the nation, Attorney General Mike Cox today announced that his office is holding three more Avoid Foreclosure forums to help at risk homeowners. The new forums will be in Detroit on February 12, Saginaw on February 13, and Grand Rapids on February 14. Cox held the nation’s largest foreclosure forum in Detroit last month, where more than 4,200 homeowners had an opportunity to speak face to face with servicers and independent loan counselors. The forum is open to the public and free of charge.
“If you’re a homeowner who has fallen behind on your mortgage or are at risk of losing your home, then I encourage you to take advantage of this free forum to speak with your loan servicer or an independent loan counselor,” said Cox. “Michigan is currently second only to Texas in the number of foreclosures across the nation. I encourage all homeowners with questions to attend my free forum and learn how they can avoid foreclosure.” Cox organized the first “Avoid Foreclosure Forum” on December 13, 2007, at Cobo Hall. The forum brought together 21 of the nation’s largest loan providers and servicers, as well as 11 HUD-approved nonprofit agencies, representatives from OFIS (Office of Financial and Insurance Services), and local county treasurers’ offices.
As many as 23 servicers have indicated they will participate in the avoid foreclosure forums. For more information on whether your loan servicer or provider will be attending, please visit www.michigan.gov/ag and click on the Avoid Foreclosure button. Statewide, letters from the Attorney General will be mailed out to more than 30,000 homeowners over the next two weeks. These mailings include a letter from the Attorney General, a flyer for free parking, a brochure with tools and tips to help save your home, and a worksheet to help borrowers prepare for their meetings. Homeowners who receive the letters have been identified as persons with whom a lender would like to discuss possible remedies to help the borrowers avoid foreclosure.
“Foreclosure is a problem that affects everyone,” continued Cox. “My goal is to bring the servicers and homeowners together.” The forums will be held: Detroit - Tuesday, February 12, 12:00 - 7:00 p.m. at Cobo Hall, One Washington Blvd., Detroit. Saginaw - Wednesday, February 13, 12:00 - 7:00 p.m. at The Dow Event Center, 303 Johnson St., Saginaw. Grand Rapids - Thursday, February 14, 12:00 - 7:00 p.m. at The DeltaPlex Entertainment and Event Center, 2500 Turner Ave., NW, Grand Rapids.
For more information about the “Avoid Foreclosure Forums,” including the free parking flyer, the downloadable brochure with tools and tips to help save your home, and contact information for the lenders and service providers attending the “Avoid Foreclosure Forum,” please visit the Attorney General’s website at www.michigan.gov/ag.
These mortgage foreclosure forums come on the heels of the settlement with Ameriquest on predatory lending. More than 18,400 consumers in Michigan will receive a check as a result of that nationwide settlement. Michigan’s share of the settlement is $14.5 million