CBNNews.com - At-risk borrowers with all types of mortgages could be eligible for help under a new plan involving six big home lenders.
The plan, called Project Lifeline, will allow seriously overdue homeowners to suspend foreclosures for 30 days while lenders try to work out more affordable loan terms.
More will be announced Tuesday by the Treasury Department and the Department of Housing and Urban Development, said a person familiar with the plan but spoke to The Associated Press on condition of anonymity because it had not yet been made public.
The plan will involve six big home lenders -- Bank of America Corp., Citigroup Inc., Countrywide Financial Corp., JPMorgan Chase & Co., Washington Mutual Inc. and Wells Fargo & Co. -- and applies to seriously delinquent homeowners, those whose mortgages are 90 days or more past due.
All six are involved in Hope Now, an effort the Bush administration brokered with the mortgage industry late last year to freeze rates on some high-cost subprime mortgages for five years to aid borrowers whose teaser rates are skyrocketing.
Since then, Treasury Secretary Henry Paulson has urged lenders to expand that coverage to struggling homeowners with conventional mortgages.
With home prices falling, even some people with good credit have gotten behind on their payments. Many homeowners now owe more than their home is worth, and banks have tightened their lending practices, leaving even people with stellar credit struggling with higher payments.
The Hope Now alliance, which includes lenders, investors and nonprofit groups, said last week that it helped nearly 8 percent of subprime borrowers in the second half of 2007 - more than its original estimate.
The group said it helped 545,000 subprime borrowers with spotty credit in the second half of last year, compared with its January estimate of 370,000. That works out to 7.7 percent of 7.1 million subprime loans outstanding as of September.
Among the subprime borrowers aided, 150,000 were helped through permanent-loan modifications, such as lower interest rates, while 395,000 negotiated repayment plans, which often involve a borrower getting back on track even after missing a few payments.
Consumer groups, however, point out that many borrowers still can't keep up, even after loan workouts. A full-fledged refinancing at a lower rate is preferable, they say.
Source: The Associated Press