More Window Dressing: New Project Lifeline Initiative Will Help Very Few

A new government initiative called Project Lifeline was announced this week. It is supposed to put foreclosures on hold for 30 days while lenders look for ways to make the mortgages more affordable. For most people this will be a useless program that will only create false hopes. There are several reasons why.

First, lenders are notoriously slow. Nothing ever gets done in 30 days. To modify a loan, they will start by offering terms that are generally not very helpful. There is really no point in setting yourself up for failure and most lenders are not known for their generosity. However, if you manage to negotiate terms that are actually doable within a timeframe where the lender will forebear from foreclosing, the lender will usually request proof of income and financial statements. Will the lender continue to forbear during the time that you are gathering the records and the lender is reviewing them? Most lenders are known for having their lawyers foreclose while they have their loss mitigation department pretend to be interested in the homeowner’s welfare.

The new program will require lenders to send the borrower who is eligible a letter. That’s nice. They will send you a letter. It doesn’t mean that they actually have to do anything to help you. It doesn’t mean that the lenders are actually staffed to handle the current mortgage foreclosure crisis that will become President Bush’s legacy (along with Iraq). If it’s not mandatory for the lender to actually modify the loan, don’t expect that they will. Even when faced with orders to show cause and allegations of predatory lending, I have seen lenders act like they had not a care in the world. They move slooowly even when threatened in court.

The new program also has serious restrictions on eligibility. The press is reporting that the following people are not eligible:

Anyone who is currently bankrupt, who hasn’t missed more than three months of payment and whose foreclosure date is less than 30 days a way will not be eligible for the program, officials said. Homeowners who bought a property that was vacant or a home as an investment will also not be eligible for the program.

Bottom line – lenders have agreed to contact homeowners. It doesn’t seem like they have agreed to do anything more than that. So, if you are more than three months behind on a residential mortgage and not bankrupt, you may get a letter. I suggest you call your attorney to discuss what options you may have whether you get a letter or not.