US Treasury Secretary Henry Paulson on Tuesday unveiled a new private sector-led program backed by six leading home lenders to help homeowners facing foreclosure in a deepening real-estate 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 the Bush administration amid the housing-market crisis to help limit the number of foreclosures, which could have a knock-on economic impact.
The new program, dubbed Project Lifeline, provides loan modification or refinancing and is aimed at "those facing the greatest immediate risk of losing their homes," Paulson said at a news conference.
Paulson said the targeted outreach would apply to all homeowners 90 days or more delinquent on their mortgages, not just holders of subprime, or high-risk, mortgages at the center 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 percent of the mortgage market: Bank of America, Citigroup, Countrywide Financial, JPMorgan Chase, Washington Mutual and Wells Fargo.
"We encourage all Hope Now servicers to adopt this new program. Project Lifeline is aimed at homeowners who face a real risk of losing their home and have not yet addressed the problem," he said. "These efforts are to help American families who both want and can through a loan modification or refinancing stay in their home."
In a statement, the Hope Now Alliance said that "hundreds of thousands" of homeowners are at least 90 days delinquent 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 reported late last month that sales of newly built homes across the US plunged by 26.4 percent during last year compared with the prior year, marking the biggest annual fall on record.
The housing sector woes and the related credit crunch have weighed on the world's largest economy, helping to drag growth to a listless 0.6 percent in the fourth quarter.
Paulson hailed the Hope Now Alliance as an example of government bringing together members of the private sector to "voluntarily address a national challenge -- without taxpayer subsidies or government mandates."
The US economy, he said, "will continue to grow, although at a slower pace in the coming quarters."
He noted that Bush was due yesterday to sign an economic stimulus package, valued at some US$168 billion for this year and next year, that will provide tax rebates to individuals and tax incentives to business.
Paulson said this would provide "a temporary, meaningful boost."
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