US Treasury Secretary Henry Paulson last night unveiled a new private sector-led programme, backed by six leading home lenders, to help homeowners facing foreclosure in a deepening housing slump to keep their homes.
The plan would allow borrowers at immediate risk of losing their homes an opportunity to pause the proceedings to work out payments or refinancing.
It was the latest effort by President George W Bush's administration amid the housing-market crisis to help limit the number of foreclosures, which could have a knock-on economic impact.
The new programme, dubbed Project Lifeline, provides loan modification or refinancing and is aimed at 'those facing the greatest immediate risk of losing their homes,' Paulson said.
He said the targeted outreach would apply to all homeowners 90 days or more late on their mortgages, and not just holders of sub-prime mortgages at the centre of the credit crunch unleashed last August.
Project Lifeline was developed by six members of the Hope Now Alliance, a mortgage-sector initiative launched four months ago at the encouragement of the Bush administration to aid homeowners battered by a collapse in housing prices and tighter credit that has led to spiking foreclosures.
Paulson said the six mortgage lenders launching Project Lifeline represent about 50% of the mortgage market: Bank of America, Citigroup, Countrywide Financial, JP Morgan Chase, Washington Mutual and Wells Fargo.
In a separate statement, the Hope Now Alliance said that 'hundreds of thousands' of homeowners are at least 90 days overdue in their payments.
Under the terms of Project Lifeline, those homeowners are urged to contact their mortgage lender and express interest in keeping their homes. Any pending foreclosure will be 'paused' for up to 30 days during a review process until a decision is made, the alliance said.
If a workout plan is determined and the homeowner follows it for three consecutive months, the mortgage loan would be formally modified.
The US housing market has been in a downturn since early 2006 following a multi-year boom. Falling home sales and property prices have triggered a spike in foreclosures as credit tightened and homeowners struggled to pay their mortgages.
The government said last month that sales of newly built homes across the US plunged by 26.4% during 2007 compared with the previous year, marking the biggest annual fall on record.
