Too Little, Too Late?

In an effort to ease the growing housing crisis, the Bush administration Tuesday announced a new plan to help the estimated 1 million Americans at risk of losing their home this year and next. "Project Lifeline" gives qualified homeowners facing foreclosure a 30-day reprieve, during which they can try to negotiate a payment plan with their lender. Unlike past initiatives, this program will be available to seriously delinquent homeowners with either prime or subprime loans, which target high-risk borrowers. Subprime mortgage holders have accounted for the vast majority of foreclosures over the past few years, but there are indications that even homeowners with good credit histories are now falling behind. More than one-third of the foreclosures that started in the third quarter of last year involved homeowners with a prime mortgage.

Six of the country's largest mortgage companies, representing about half of the U.S. market, have already pledged to participate in the aid program, including Bank of America, Citigroup, J.P. Morgan Chase & Co., Washington Mutual and Wells Fargo. Treasury Secretary Henry Paulson has urged others to join as well. Even if all lenders sign on, though, the aid comes too late for millions who have already lost their homes to foreclosure or are scheduled to do so in less than 30 days. And it's unclear whether a monthlong pause in foreclosure proceedings against borrowers more than 90 days behind will be enough to have a major impact. NEWSWEEK's Jennifer Barrett discussed the new plan with Kenneth Wade, CEO of NeighborWorks Americas, a nonprofit corporation that supports more than 240 affordable housing and community development organizations nationwide and runs, with the Homeownership Preservation Foundation, a help line for those facing foreclosure (1-888-995-HOPE). Excerpts:

NEWSWEEK: How much of a difference will this plan make for homeowners struggling to cover their mortgage payments?
Kenneth Wade: Anytime you can give borrowers more time to seek a solution other than foreclosure it's a good thing. The fact that these six [mortgage] servicers have stepped up to the plate, offering this as an additional tool, is great. Obviously, many more probably need to do the same thing [to really make a difference].

Why haven't even more mortgage lenders signed on?
From what I understand, it was just timing. It would have taken more time to get all these other servicers.

What advice would you give delinquent homeowners who don't have a loan with one of these six?
They should ask for the same opportunity extended by these six servicers.

Is 30 days enough time to fend off foreclosure?
It can be. It's not enough time to finalize a resolution, but it will give you an opportunity to develop a game plan.