Six major lenders have teamed up with nonprofit organizations to help delinquent borrowers stave off foreclosure. Participating lenders Countrywide Financial, Wells Fargo, Washington Mutual, Bank of America, Citibank, and JP Morgan Chase hope that more lenders will join in if the pilot program, called Project Lifeline, accomplishes its goal.

This program differs from earlier efforts in that the lenders are taking preemptive action--instead of relying on the borrowers to make contact when they have problems making their mortgage payments. Mortgage lenders have been publicly skewered for being too slow in helping troubled borrowers, but the lenders too have been frustrated by lack of communication from troubled borrowers. In fact, the biggest problem lenders face is that delinquent borrowers are often the hardest to get hold of. Amazingly, half of the borrowers who lost their homes in foreclosure sales never had any contact with their lender or loan servicer. Lenders repetitively mail and call homeowners in their attempts to reach them, often to no avail.

Foreclosure Outreach

Bank of America has even gone so far as to leave prepaid cell phones at the homes of hard-to-contact borrowers. Countrywide Financial has agreed to work with the Association of Community Organizations for Reform Now (ACORN), to help borrowers missing payments get financial counseling. All six participating mortgage lenders will send eligible borrowers a notice by mail asking them to call within 10 days. Homeowners uncomfortable contacting their lenders can opt for calling a housing counselor instead at 888-995-4673 

Expanding Foreclosure Help

Project Lifeline's outreach goes beyond the Hope Now Alliance of 25 lenders, which beginning in October 2007 offered help only to those with subprime adjustable rate mortgages. Under that plan, lenders successfully modified 13,000 loans and offered 90,000 new plans for repayment. This latest effort extends help to all homeowners who are at least 3 months delinquent on their mortgages, whether their financing is prime, alt-A, subprime, a second mortgage, or home equity loan.

Freezing the Foreclosure Process

If the lender determines that feasible modifications to the loan would enable the borrower to repay it, the foreclosure proceedings may be suspended for up to 30 days while new terms are worked out. Borrowers not as far along in the foreclosure process may be granted a 60 day extension in which they can try to sell their home or modify their loan terms.

More Help from Mortgage Lenders

Available help depends on the resources of the borrower, the equity in the home, and the extent of the delinquency. Lenders have been quickly refinancing qualifying borrowers out of their adjustable rate mortgages and into fixed-rate government-backed mortgages. Eligible subprime borrowers who could afford the initial or teaser rates on their adjustable rates loans but cannot pay the new higher rate have had their low rates extended by their lenders.

Project Lifeline's Limitations

Borrowers must be living in their home and plan to keep it. They may also have to go through credit counseling and document their income and expenses. Homeowners who bought their property on speculation or for a second home are not eligible for project Lifeline help. Neither are those who lied on their loan applications 

US Treasury Secretary Henry Paulson believes that the program can help many homeowners. However, not all borrowers will qualify for help. "If you can't afford to live in a home, you'll go back to renting," he stated. The good news is that the project should help those who sincerely want to keep their residences. If they are capable of paying their mortgage with modified terms, their lender is willing to work with them. Paulson added, "Project Lifeline has the potential to offer new solutions to responsible, able homeowners who want to keep their homes."

Sources:

Detroit Free Press

HopeNow.com

Los Angeles Times

South Florida Business Journal

USA Today