The newest effort to curb the mortgage foreclosure mess was revealed today. The Program termed Project Lifeline will give troubled homeowners a 30 day reprieve. 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.
Key Points
- Not confined to ARMS
- Not only available to subprime borrowers but to people with any kind of home mortgage
- Temporarily pause the foreclosure process to try and find a solution
- Loan modifications are possible
- If loans are modified & homeowners make payments on time for three months, the changes to the terms of loans will become permanent
- Countrywide
- Wells Fargo
- Washington Mutual
- Citigroup
- JP Morgan
- Bank of America
Participating lenders will send out letters to homeowners who are seriously behind on their mortgage payments. Homeowners will be asked to call their lender wherein, they will be asked if they want to stay in their home. At that point, the lender will arrange some sort of financial counseling and examine whether or not a loan modification is possible. Lenders are making no promises of loan modification, however this would obviously be the ideal outcome for both parties.
Seems like a decent band-aid at this point. We are at the tip of the proverbial iceburg when it comes to ARM resets though. If Project Lifeline can save a significant number of homeowners from foreclosure I think we may see an extension. It's really too soon to tell at this point, but a step in the right direction nonetheless.
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