Earlier this month, President Bush and Treasury Secretary Henry Paulson, together with representatives from Bank of America Mortgage, JP Chase, Citigroup, Countrywide, Washington Mutual and Wells Fargo announced the creation of “Project Lifeline” designed to help financially strapped homeowners avoid foreclosure. You can read more about Project Lifeline here.
Together, the participating mortgage companies service about half of all mortgages in the United States. Project Lifeline is designed to add 30 days to the foreclosure process in order to give homeowners additional time to renegotiate or come current with their loans.
The specifics of this program are somewhat unclear to me. A search for “project lifeline” on Bank of America’s web site yielded no results. A search on Washington Mutual’s web site yielded no results. Countrywide’s web site does not have a search function, nor does the web site for Chase Mortgage.
Presumably, a homeowner looking for relief from his mortgage delinquency will have to call the same mortgage company that has previously been calling him to demand payment. Obviously, any effort by the mortgage industry to head off foreclosures is welcome, but I don’t sense that there is a whole lot of effort being put into Project Lifeline.
My colleague Scott Riddle points out on his Georgia Bankruptcy blog that Project Lifeline is not available to debtors in bankruptcy. It is also not available if you have rental homes or if your home is empty.
In reading various blogs, it appears that the primary criticism of Project Lifeline has to do with its focus. As blogger Paul Kedrosky points out, high foreclosure rates are a function of declining home values, not interest rates. Kedrosky argues that homeowners are likely to walk away from their homes and mortgages if they realize that the value of their home is greatly exceeded by the debt on that home. It will be interesting to see if Project Lifeline does anything to stop the growing number of foreclosures.
I would be interested to hear from anyone who has attempted to delay foreclosure using the Project Lifeline tactic and if you agree with Mr. Kedrosky that foreclosures are more a function of falling home values rather than rising interest rates.