The banks offer a 30-day freeze on some foreclosures to consider loan modifications that may be available. The effort, called ``Project Lifeline'', would help stabilize some communities disrupted by mortgage defaults.
``Project Lifeline has the potential to offer new solutions to responsible, able homeowners who want to keep their homes,'' says Treasury Secretary Robert Paulson. ``As our economy works through this difficult period, we will look for additional opportunities to try to avoid preventable foreclosures.''
According to the plan outline, Lenders would start the process with a letter to homeowners more than 90 days delinquent on payments that lays out procedures for them to ``pause'' the foreclosure process. The homeowner will be given 10 days to respond to the notice and will have to provide the lender additional financial information so the mortgage holder is able to weigh new payment options, or look at writing a new loan, most likely these borrowers will be steared towards an FHA loan that will insure the lenders agains any losses, and heap the problems onto the US taxpayer.
Under the plan, Subprime, Alt-A and prime borrowers may be eligible.
By definition, Subprime mortgages are loans for borrowers having poor credit and/or high debt ratios. Whereas, Alt-A loans are made to borrowers who cannot meet the terms of standard loan products, such as proof of income, noncomforming property type or investment property collateral, and also thosw who may not have larger down payments.
Federal Reserve officials estimate that approximately 2 million homeowners face an increase in their rates over the next two years as their ARM loans reset and adjust. Economists estimate foreclosures this year will approximately 1 million higher than the anuual average of 600,000 in a typical year.
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