(CBS/AP) The Bush administration, trying to deal with a worsening housing slump, announced a new initiative Tuesday aimed at helping homeowners about to lose their homes. For qualified homeowners, it will put the foreclosure process on hold for 30 days.
Dubbed "Project Lifeline," the new program will be available to people who have taken out all types of mortgages, not just the high-cost subprime loans that have been the focus on previous relief efforts.
The program was put together by six of the nation's largest financial institutions, which service almost 50 percent of the nation's mortgages.
These lenders say they will contact homeowners who are 90 or more days overdue on their monthly mortgage payments. They will be given the opportunity to put the foreclosure process on pause for 30 days while the lenders try to work out a way to make the mortgage more affordable to the homeowner.
"Project Lifeline is a valuable response, literally a lifeline, for people on the brink of the final steps in foreclosure," Housing and Urban Development Secretary Alphonso Jackson, said at a joint news conference with Treasury Secretary Henry Paulson.
He said the goal was to provide a temporary pause in the foreclosure process "long enough to find a way out" by allowing homeowners and lenders to negotiate a more affordable mortgage.
Paulson said that the new effort was just one of a number of approaches the administration was pursuing with the mortgage industry to deal with the country's worst housing slump in more than two decades.
It's really about protecting borrowers, it's about protecting neighborhoods. And it's also about protecting the housing market and the economy, ultimately," Sheila Bair, chairman of the FDIC, told CBS News.
In December, President Bush announced a deal brokered with the mortgage industry that will freeze certain subprime loans, those offered to borrowers with weak credit histories, for five years if the borrowers are unable to afford the higher monthly payments as those mortgages reset after being at lower introductory rates.
"As our economy works through this difficult period, we will look for additional opportunities to try to avoid preventable foreclosures," Paulson said. "However, none of these efforts are a silver bullet that will undo the excesses of the past years, nor are they designed to bail out real estate speculators or those who committed fraud during the mortgage process."
All six lending companies are currently involved in Hope Now, a Bush administration-organized effort to freeze rates on some high-cost subprime mortgages for five years to aid borrowers whose teaser rates are jumping sharply higher. Since then, Paulson has urged lenders to expand that effort to cover struggling homeowners with conventional mortgages.
The Hope Now alliance, which includes lenders, investors and nonprofit groups, said last week that it helped nearly 8 percent of subprime borrowers in the second half of 2007 - more than its original estimate.
The group said it helped 545,000 subprime borrowers with spotty credit in the second half of last year, compared with its January estimate of 370,000. That works out to 7.7 percent of 7.1 million subprime loans outstanding as of September 2007.