30 Days Hath Your Lender

The country’s biggest lenders have come up with a plan to give certain borrowers who are in trouble an extra 30 days to work things out.

The Arizona Republic ("Ariz. banks join ‘Lifeline’ to aid homeowners" – Feb13, 2008) reports that:

(Six large home-loan lenders have) joined a White House effort to add breathing room for all types of homeowners facing foreclosure, not just people with risky subprime loans.

The initiative, dubbed Project Lifeline, will offer a 30-day foreclosure reprieve while the lenders intensify their efforts to contact troubled borrowers in hopes of working out payment solutions.

Several hundred thousand borrowers could be affected nationally.

Bank of America, Chase, Citigroup, Countrywide Financial, Washington Mutual and Wells Fargo will reach out to homeowners 90 days or more overdue on payments, provided they haven't filed for bankruptcy, don't have a foreclosure date within the next 30 days, haven't vacated the property and haven't used their loans to fund a vacation home or investment property.

The article goes on to say:

Some Arizona observers question how effective the latest initiative will be.

"I still see pretty significant pressure into summer" on bankruptcies and foreclosures, said Chris Bayley, a partner at Phoenix law firm Snell & Wilmer, citing the slowing economy and slumping real-estate market as overriding factors.

"These programs are like window dressings or Band-Aids that might not stem the flow."

Steve Williams, a principal at Scottsdale bank management-consultant firm Cornerstone Advisors, also labeled the plan as window dressing.

"The fundamental issue is that many Americans have bought too much house and too much car," he said. "Their home values, mortgage rates and personal cash flow are so out of whack that 30 days won't make a big difference."

I have to agree with those who question the point of this. If this 30 days helps you, then fantastic, you’re off the hook. But this seems to have been written by the administrations’ speech writers who produce lots of nice words without an ounce of logic behind them. For example, this plan will allegedly allow lenders to have more time to contact borrowers before they are forced to foreclose? Yet, in every case that I have read about, it is the borrowers who have had no luck contacting or negotiating with lenders, not the other way around. It is beyond absurd to think that the bank, who holds the mortgage on a borrower’s house, and therefore must have his address, is not able to figure out how to get in touch with him. Furthermore, isn’t it part of the foreclosure process that the lender notify the borrower of the situation?

As with the failed Big Bank initiative of a couple months ago to shore up the collapsing subprime market by essentially keeping bad mortgaged backed securities off of the market to fraudulently hide their real market value, this initiative seems like lenders trying to help themselves while taking credit for going the extra mile.

Please email me at LetItSink@gmail.com if you know of homeowners who have been helped by this program. I would like to follow their stories and see how it works. Somehow I don’t expect to be flooded with letters.