As the Bush administration announced a fresh plan to aid homeowners overburdened by their mortgages, initial figures suggest much-touted earlier efforts have done little to help most troubled borrowers.
An earlier plan, brokered in December by the Treasury Department, called for the mortgage industry to freeze interest rates or expedite refinancing for potentially hundreds of thousands of subprime borrowers, so long as they were current on their payments. In a companion move, the administration announced a toll-free number for homeowners, but the hotline has provided counseling to just 36,000 borrowers in the past two months, and representatives have suggested loan workouts for fewer than 10,000 of them — a small fraction of borrowers in need.
Other callers were looking for money, which the hotline doesn’t have available, or had only general questions, executives running the project say. It’s not clear how many borrowers were able to stay in their homes because of the hotline’s help.
The preliminary numbers throw into sharp relief the difficulty of finding a workable solution to the housing crisis, with hundreds of billions of dollars in potentially troubled loans flowing through the financial system and foreclosures hitting recent highs. Adjustable rates on some two million subprime mortgages are expected to rise in the next two years, raising the specter of further delinquencies and more financial turmoil.
Continuing concerns about the impact on the U.S. economy and society prompted six major mortgage companies and the Bush administration yesterday to renew their efforts. They announced “Project Lifeline,” a new program to help deeply troubled borrowers who are more than 90 days behind in their mortgage payments and face the imminent loss of their homes.
The companies say they will send letters to homeowners alerting them that if they make a call to their loan servicer and provide financial information, they might get a 30-day halt in foreclosure proceedings and a chance to negotiate friendlier mortgage terms.
The companies — Bank of America Corp., J.P. Morgan Chase & Co., Citigroup Inc., Countrywide Financial Corp., Washington Mutual Inc. and Wells Fargo & Co. — service about 50% of all mortgages. They estimate that the number eligible for the new program might reach into the hundreds of thousands. Treasury Secretary Henry Paulson called it “an important new initiative.”