US government, major mortgage leaders move to help embattled homeowners
13/2/2008 15:46
The US government and six major mortgage lenders yesterday offered to
throw a lifeline to homeowners who are about to lose their property in a further
attempt by the ruling administration to ease the subprime crisis.
In an
initiative called Project Lifeline, people who have fallen behind with their
mortgage payments can qualify for a variety of loans, rather than simply
subprime mortgages.
The scheme comes in addition to December's program by the
Bush administration and lending industry to freeze interest rates at current
levels on subprime loans.
"This is an important new initiative, targeted to
reach not only subprime borrowers, but all 90-day delinquent homeowners
nationwide with a step-by-step approach to find individual solutions to
individual problems," said Treasury Secretary Henry Paulson.
Under the new
program, six of the nation's largest financial institutions said they will begin
contacting homeowners who are 90 or more days overdue on their monthly mortgage
payments. The homeowners will be given the opportunity to put the foreclosure
process on pause for 30 days while the lenders look for a way to make the
mortgage more affordable.
The program is not a solution to the housing crisis
but is considered a "pause" in the foreclosure process, giving homeowners an
extra 30 days to work out a payment or modification program.
Some 1.3 million
home loans are either seriously delinquent, meaning 90 days or more, or already
in foreclosure, according to the Mortgage Bankers Association.
"No program
can bring every struggling borrower into the counseling and evaluation process,
and we cannot help those who choose not to honor their obligations," said
Paulson. "None of these efforts are a silver bullet that will undo the excesses
of the past years."
Speaking on the overall health of the economy, Paulson
insisted that he sees the economy growing, but at a slower pace in the coming
quarters.
The economy remains "fundamentally diverse and resilient," he
said.
Bank of America Corp, Citigroup Inc., Countrywide Financial Corp,
JPMorgan Chase & Co, Washington Mutual Inc. and Wells Fargo & Co, who
represent 50 percent of the mortgage market in the United States, are
participating in the program. The same banks are part of the administration's
Hope Now Alliance.
The White House is also optimistic about the
program.
"No single program will solve all the problems in the housing
market, but the president believes these efforts will help us get through this
rough patch in our economy," said spokeswoman Dana Perino.
Meanwhile, Housing
and Urban Development Secretary Alphonso Jackson said Project Lifeline "is a
valuable response ... for people on the brink of the final steps in
foreclosure."
Yet, critics of the administration would like to see still more
action since foreclosure rates continue to rise.
"Homeowners at risk of
foreclosure are floating 50 feet from shore while Project Lifeline throws them a
30-foot rope," said Senator Dick Durbin.
Senator Chuck Schumer praised the
new program but added that the problem was that the administration's effort does
not address the fact that more than 30 percent of homeowners who bought in the
last two years owe more on their mortgages than their houses are currently
worth.
"Congress is working to give bankruptcy judges the ability to trim
borrower debt, but that same option should be available to homeowners before
they have to declare bankruptcy. Americans shouldn't have to go to court to get
their loan fixed," he said.
Xinhua
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