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Project Lifeline: Who Benefits?

by Jeffrey Hogue
March 7th, 2008

On Tuesday, February 12, 2008, the Bush Administration announced the Treasury Department’s “Project Lifeline.” Simply put, “Project Lifeline is a foreclosure prevention program developed by six of this country’s largest home loan servicers (which collectively account for approximately 60% of the nation’s estimated $9 trillion residential receivables market) and merely “blessed” by the Treasure Department. Project Lifeline will require the participating loan servicers to begin sending letters to borrowers who are 90 or more days overdue on their monthly mortgage payments. Each borrower will be given the opportunity to literally put the foreclosure process on pause for 30 days while his or her loan servicer looks for a way to make the mortgage more affordable. If, however, a borrower does not respond to the Project Lifeline letter within 10 days, that borrower’s loan servicer will initiate the foreclosure process.

So, you ask, what kind of payment or term adjustments are the participating servicers required to offer the borrowers during the 30-day freeze under this new program? None. During the 30-day freeze, the participating servicers are under zero obligation to agree to any sort of alternative payment options. The period is established solely to allow the servicers and borrowers time to “try” to work out a solution.

Given that there are absolutely no teeth in this new program, will it have any effect on the ever increasing foreclosure rate in this country? Or, will Project Lifeline serve simply to delay the foreclosures for 30 days? At the very least, we should expect that Project Lifeline will (1) inform borrowers that there are potential options other than foreclosure, and (2) get borrowers and servicers talking. But whether the new program will do more than increase “talk” between borrowers and servicers will depend, in large part, on the willingness of the participating servicers to bring meaningful options to the table.

If, for example, the participating servicers are anticipating working with borrowers to freeze their rate adjustments, decrease rates, or even help borrowers refinance into a better loan, the program will likely be a shining example of how the private sector can creatively and efficiently cure what the legislature had only just diagnosed. However, some fear that the six participating servicers plan to use “Project Lifeline” as nothing more than a PR maneuver in order to reduce public pressure for legislatively mandated borrower bail-out programs (programs which would undoubtedly damage the servicers’ respective bottom lines).

Only time will tell if Project Lifeline will breathe new life into at-risk borrowers, or whether the new program is merely a public relations ploy where only the servicers will benefit.

Attorney Jeffrey L. Hogue is a partner at the San Diego law firm of Hogue & Belong. Mr. Hogue is also a founder of the Mortgage Accountability Association.

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