WASHINGTON (AP) — At-risk borrowers with all types of mortgages, not just high-cost subprime loans, could be eligible for help under a new plan involving six big home lenders.
The plan, called Project Lifeline, will be announced Tuesday by the Treasury Department and the Department of Housing and Urban Development, said a person familiar with the plan who confirmed earlier news reports about the plan but spoke on condition of anonymity because it had not yet been made public.
Against a backdrop of surging defaults and administration officials' prodding of the mortgage industry, the plan will allow seriously overdue homeowners to suspend foreclosures for 30 days while lenders try to work out more affordable loan terms.
On a pilot basis, the plan will involve six of the largest mortgage lenders, in hopes that more lenders will sign on. The participants are Bank of America Corp., Citigroup Inc., Countrywide Financial Corp., JPMorgan Chase & Co., Washington Mutual Inc. and Wells Fargo & Co.
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 jumping sharply higher. Since then, Treasury Secretary Henry Paulson has urged lenders to expand that effort to cover struggling homeowners with conventional mortgages.
The new plan applies to seriously delinquent homeowners, those whose mortgages are 90 days or more past due.
Consumer groups, however, point out that many borrowers still can't keep up, even after loan workouts. They say many of the borrowers in the Hope Now effort have negotiated short-term loan modifications or repayment plans, which often involve a borrower getting back on track after missing a few payments. A full-fledged refinancing at a lower rate is preferable, they say.