A new initiative called Project Lifeline was just launched by six of the largest banks and lenders in conjunction with the U.S. Treasury and the Department of Housing and Urban Development. The lenders include Bank of America, Citigroup, Countrywide, Wells Fargo, Washington Mutual, and JP Morgan Chase, which together represent about half of the mortgages in the U.S.
Unlike previous initiatives which targeted subprime loans, this plan address all types of home loans, including home equity loans. For borrowers who are more than 90 days late in payments and facing foreclosure, this plan will pause foreclosure proceedings and give homeowners 30 days to negotiate new payment terms with their lender.
While this is a step in the right direction and may help some borrowers, only a fraction of loans are expected to be serviced under this agreement. Unfortunately, the bill doesn’t go far enough to help home owners who are facing huge mortgages and declining home values. For most home owners, simply walking away from their homes rather than paying off a mortgage much larger than their home value is a more attractive option.
In the Bay Area and large metropolitan areas of San Francisco, this program may indeed help those who need some time to sort out finances and work out new terms with a lender. Although home prices are declining in California as well, most of the Bay Area is not seeing the huge declines that other areas are experiencing. In fact, some areas such as San Francisco have still seen an increase in home prices. If you are in trouble, reach out to your lender to see if terms can be negotiated and what loan modifications can be made. It’s a win-win for both sides if a foreclosure can be avoided, and it’s best to ask for help before you’re delinquent in your payments.
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