Bank and Government Foreclosures Prevention Efforts

The U.S. government and six major mortgage lenders have launched the Project Lifeline, an outreach initiative designed to help distressed homeowners avoid bank and government foreclosures.

U.S. Treasury Secretary Henry Paulson said that the public-private collaboration is intended for troubled homeowners who are more than 90 days delinquent in their monthly mortgage payments.

Paulson hoped that the initiative will provide the much needed respite from bank and government foreclosures.

He explained that the outreach project is different from other initiatives because it targets troubled homeowners who are on the edge of bank and government foreclosures, but have not made any action to address the problem.

According to industry experts, delaying the sale of bank and government foreclosures homes is a standard procedure provided that the distressed borrower has voluntarily discussed options to save his property from foreclosures.

To sum it up, the outreach project is encouraging delinquent homeowners to pay attention to letters and telephone calls from mortgage companies and to seek assistance as early as possible to prevent losing their properties to government and bank foreclosures.

According to mortgage lenders, their main problem is how to communicate with troubled homeowners. They pointed out that in about 50 percent of foreclosures, the homeowner does not communicate with mortgage lenders despite the latter’s efforts.

Real estate lawyer Lisa Breier Urban said that borrowers who are delinquent for 90 days have probably received several demand letters from lenders and numerous calls from banks.

She hoped that the outreach project will motivate borrowers to respond to letters and calls by mortgage lenders to enable to find ways to avoid bank and government foreclosures.

She pointed out that a grace period of 30 days are not enough time to come up with workable terms that could help distressed borrowers avoid bank and government foreclosures.

Meanwhile, the National Community Reinvestment Coalition (NCRC) is proposing that the U.S. government purchase troubled loans from mortgage lenders at a discount. NCRC Chief Operating Officer Jim Carr is suggesting that after buying delinquent loans, the federal government should make the bargained loans available to mortgage servicers and allow them to work out a deal to try to save the troubled loans from bank and government foreclosures.

The outreach project is an offspring of Hope Now Alliance, an initiative that focused on helping delinquent homeowners with subprime mortgages avoid foreclosures.

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