"PROJECT LIFELINE" - President Bush's Initiative to Help More Homeowners Facing Foreclosure - Will it Help?
EARLIER RELIEF EFFORT FOR SOME SUB-PRIME BORROWERS DRAWS LACKLUSTER RESULTS!
Under a new program unveiled by the President yesterday, dubbed "Project Lifeline," distressed homeowners, behind 90 or more days in their mortgage payments, could apply for a 30-day pause in the foreclosure process. During that time, it would be hoped borrowers would reach a payment workout arrangement with their lenders, or easier financing terms.
Lenders involved in the program include lending giants Bank of America, J.P. Morgan Chase, Washington Mutual, and Wells Fargo. Together, these national firms represent approximately 50% of all U.S. mortgages.
The "Hope Now Allowance," a plan worked out with the same list of mortgage lenders to help some sub-prime borrowers freeze rate resets and expedite a forbearance or re-finance plan with their mortgage lenders, has had lackluster response to date. Response to a hotline set up for distressed borrowers to call has generated only 36,000 calls nationwide to date to their 1-888-995-HOPE Hotline - far lower than projected. Loan workouts have been suggested for only 10,000 across the country. It is unknown how many troubled borrowers, in the end were able to take advantage of the plan. "Project Lifeline" is available to those with prime or sub-prime mortgages.
The response to the Hope Now program points up how difficult it might be to solve the current credit and housing doldrums. Over the next two years, adjustable rates on nearly 2 Million sub-prime mortgages will reset at far higher rates, potentially creating thousands of new mortgage foreclosures.
Why do delinquent borrowers hesitate to contact their lenders for refinance or forbearance? A November Freddie Mac Survey indicated 18% of these borrowers felt they can handle things themselves, without help. Another 16% believed they lacked the money to repay their loan. Another 35% were simply embarrassed, felt their lenders would not listen, or were simply in denial.
Foreclosure, of course, can trash a borrower's credit for 7-10 years, and prevent them from purchasing another home. Lenders themselves usually lose about 50% of the loan amount on foreclosed properties, according Anthony Pennington-Cross,of Marquette University in Wisconsin.
In Chicago, an estimated 31,000 properties are either in foreclosure, or facing pre-foreclosure actions, according to RealtyTrac.com.
For further details and relevant links, see the article by Ruth Simon and Tom McGinty in today's Wall Street Journal.
DEAN MOSS & DEAN'S TEAM CHICAGO
