Project Lifeline for Mortgage Crisis

ForecloseThe new Project Lifeline for the mortgage crisis has nothing to do with Project Life Line which is a medical nonprofit or “Project Lifeline provides young adults who have become involved in the juvenile justice system of Cook County, IL.” You would have thought the government and big banks could have checked Google before coming up with a name!

Some people in danger of losing their homes may receive new help through a program announced yesterday. Dubbed “Project Lifeline,” the White House-backed plan calls for six major lenders to voluntarily contact homeowners who are 90 days or more behind on their mortgage payments, and possibly grant a 30-day “pause” in the foreclosure process so a solution can be worked out. The Newsday story continues here.

It seems to me that it is a legitimate acknowledgment of a problem and crisis but I am not sure that is a good solution (I don’t know what is) to the problem. If it only postpones disaster is it worth pursuing?

12 Comments on “Project Lifeline for Mortgage Crisis

  1. Hi there..As I visit and explore your blog I notice that we have similarity of topic that we have. I wonder if we could ex-link to my Housing Homes blog. Just visit my blog and leave your blog info there..Thanks..

  2. Yeah, I always wanted to live in Ayala Alabang and at a cool $1 million I can thanks to housinghomes.com. I think HH is just desperate for exposure. He’s feeling the crunch I guess.

  3. And here’s some local legislation, yes, another c and p, this time from Ryan Frank’s blog

    A Senate committee tonight endorsed mortgage lending reforms to address what consumer groups say were abusive lending practices during the recent housing boom.

    The Senate Commerce and Labor committee voted 3-2 along party lines to back the changes proposed by Sen. Ben Westlund, D-Bend. Senate Bill 1090 heads to the Ways and Means committee and must pass quickly through the Legislature before the session ends late this month.

    If approved, the bill would require brokers to:

    Ensure the borrower has an ability to make their payments by verifying the borrowers income, assets, credit history and debts.

    Limit penalities for borrowers who want to pay off their loans early

    Show subprime borrowers the lowest fixed-rate mortgage they could qualify for

    Disclose incentives that lenders pay for selling borrowers a higher rate loan, a practice known as yield spread premium. Westlund’s original bill outlawed the incentives.

    Raise bonding requirements from $50,000 to $100,000 and require “errors and omissions” insurance of $500,000

  4. Charles: Those option ARM loans are the ones I referred to as “FICO Shredders” here months ago (back last summer, I think)…. Glad to see the Mainstream Media is finally catching up.

    But if you want to be ahead of the game instead of finding out about stuff six months late read the Calculated Risk blog daily.

  5. Bearlee…

    Thx for posting this. I am all for legislation that subverts the paradigm of punishing the prudent and rewarding the spendthrifts.

  6. It says something about the state of our capitalist system that we now need a law to do this:

    Ensure the borrower has an ability to make their payments by verifying the borrowers income, assets, credit history and debts.

    20 or 30 years ago who would have imagined that we’d need a law like that?

  7. “Ensure the borrower has an ability to make their payments by verifying the borrowers income, assets, credit history and debts.”

    The reason why we need a law is that mortgages are being SOLD to home purchasers with the intent of SELLING the contract to third parties. When the banks held their mortgages it was in their best interest to see that the borrowers could pay. When mortgages are sold rating agencies a supposed to evaluate the viability of the mortgages BUT they wanted the rating fees from the sellers and did not do any due diligence. What a mess.

  8. Nell Plotts: Oh, I understand completely. It was a matter of the incentives becoming all wrong.

    Still, I think it’s interesting that we’ve taken the route we’ve taken that’s led to needing this kind of law.

  9. TiP, thanks for posting a link to Calculated Risk blog. I made the silly assumption that bloggers and bloggees all had that great blog bookmarked. Maybe that explains the “Hear no evil, see no evil, speak no evil” mentality I see on a few blogs, especially those authored by folks w/ a potential conflict of interest. Folks just don’t know what’s going on and MSM is of no help. Our housing market and our economy are on life support (and someone forgot to maintain health insurance) so guess what, the plug has been pulled though it’s gonna be slow death. And no, Big Ben, another cut in interests rates is NOT gonna help.

    Anyone see the defense budget proposal?!?! HOLY SH!T! Soon historians will be comparing the US-Iraq war to the Soviet-Afghanistan war of the 80’s where the US pumped so much money into the Afghani side to keep the war going that it bankrupted the Soviets.

  10. And no, Big Ben, another cut in interests rates is NOT gonna help.

    You’re right there bearlee. Look at what’s happened to the 10 year treasury bond today: up another 12 basis points. That’s going to put 30 year fixed rates up pretty close to 6% again. So they went down and got close to 5% for a few days after the last couple of cuts, but now the bond market is saying No Thanks! Muni bond auctions have been failing the last several days. Student loan debt auctions have also failed. It’s the bond markets that ultimately set interest rates, not the Fed – the Fed only sets very short term inter bank rates. Sure, the Fed can have a temporary effect, but look at the last couple of months and you can see a textbook example of the Fed’s impotence: They’re pushing on a string.

    The bond markets are also not happy about the various “bailout” and stimulus programs that have been floated – they’re going to make the deficit go up.

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