Mortgage lenders throw 'Lifeline' to homeowners

Jet, March 3, 2008 by Kevin Chappell

Borrowers with all types of mortgages, not just risky subprime loans, could be eligible for help under a new agreement between the Bush administration and six of the country's biggest home lenders. But when it comes to stemming the tide of foreclosures among Blacks, at least one economic group has already predicted the fallout from the housing meltdown could be staggering.

The new plan, called Project Lifeline, will allow seriously overdue homeowners--those whose mortgages are 90 days or more past due--to suspend foreclosures for 30 days while lenders try to work out more affordable loan terms.

At JET press time, Bank of America Corp., Citigroup Inc., Countrywide Financial Corp., JPMorgan Chase & Co., Washington Mutual Inc. and Wells Fargo & Co. have all signed on. It is believed that other lenders will soon follow suit.

Treasury Secretary Henry Paulson urged lenders to expand their efforts to help all struggling homeowners, even those with conventional mortgages.

Those include homeowners who signed up for adjustable-rate mortgages that allowed them to make smaller, steady payments for several years until a higher, fluctuating interest rate kicked in. Others borrowed against their rising equity as home prices climbed, assuming they would be able to refinance or sell their homes before the higher payments began. But as prices have plummeted, many now owe more than their homes are worth.

This latest plan comes on the heels of a similar plan late last year to freeze rates on some subprime mortgages for five years to aid borrowers whose teaser rates are jumping sharply higher. It is believed that nearly 8 percent of those with subprime loans, or about 545,000 borrowers, have taken advantage of the plan dubbed "Hope Now."

Consumer groups, however, point out that many borrowers still can't keep up, even after loan workouts.

A new report, "Foreclosed: The State of the Dream 2008," by the non-profit group United for a Fair Economy (UFE) estimates that the subprime mortgage crisis will cause Blacks to experience wealth losses of between $72 billion and $93 billion over its duration.

"As a result of cold-blooded targeting of people of color, and low-income people in general, by the subprime mortgage industry, communities across the nation are being torn apart," said Brenda Cotto-Escalera, UFE co-executive director and a co-author of the report.

--Kevin Chappell with AP reports