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WASHINGTON - Homeowners threatened with foreclosure would in some instances get a 30-day reprieve under an initiative the Bush administration announced Tuesday.

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. The homeowners 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 homeowners.

"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 letting homeowners and lenders negotiate a more affordable mortgage.

Paulson said 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.

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 cannot 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."

In coming days, lenders will begin sending letters to homeowners who might qualify for the new program. Homeowners won't qualify if they have entered bankruptcy, if they already have a foreclosure date within 30 days, or if the home loan was taken out to cover an investment property or a vacation home.

The Mortgage Bankers Association reported that at least 1.3 million home mortgage loans were either seriously delinquent or in foreclosure at the end of the July-September quarter.

Private economists are forecasting that the number of foreclosures could soar to 1 million this year and next, about double the 2007 rate.

Officials did not have an estimate of how many people might be helped by the new "Project Lifeline" program.

Democratic critics said the administration was still not doing enough to help with a serious crisis that has slowed the overall economy to a near standstill and raised worries about a full-blown recession.

In a statement, Sen. Hillary Rodham Clinton, who is running for the Democratic presidential nomination, said that last year she had called for a 90-day moratorium on subprime foreclosures. She said the administration has been slow to react to the unfolding crisis.

"The administration's latest initiative is welcome news, but more remains to be done," she said in a statement.

Senate Banking Committee Chairman Christopher Dodd, D-Conn., said the finance industry and the administration were falling further and further behind in dealing with the growing crisis.

"This plan, while a step in the right direction, will not stem the tide of the millions of foreclosures we are facing in the coming months," Dodd said in a statement. His committee will hold a hearing on the housing crisis on Thursday with testimony from Paulson and Federal Reserve Chairman Ben Bernanke.

The six participating banks are Bank of America Corp., Citigroup Inc. Countrywide Financial Corp., J.P. Morgan Chase and Co., Washington Mutual Inc. and Wells Fargo & Co.

They are all members of the Hope Now Alliance, an industry group that is trying to coordinate a response to the mortgage crisis. Officials urged homeowners to call the group's toll free hot line number at 1-888-995-HOPE for assistance.

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AP Business Writer Marcy Gordon contributed to this report.

February 20, 2008

Interest Rates are, unfortunately, going higher and not lower.

Not at all going the direction we (Real Estate professionals, borrowers, AE's) all want and frustrating for those on the fence (who will likely stay on the fence longer) as hopes for lower rates fade and realty sets in...

We had at least two intra-day rate changes Tuesday for the worse and one already today. So where do we go from here? A week ago we were in low to middle 5's and now we're back over 6 at par pricing on a 30 yr fixed conforming.....

In light of recent significant interest rate reductions by the Fed, and general consumer and media sentiment that rates should be heading lower, how do you respond, as a knowledgeable "insider" in the loan industry, when you have to tell your borrower the new REALTY of our business and that interest rates are actually headed higher, not lower?

A few items to consider and possible responses to your potential buyers question

Why are rates going higher?

#1. Inflation concerns by the Fed; recent economic data (but not all) shows the economy may be heating up in some areas....higher interest rates slow inflationary pressures on food, gas, energy costs, consumer goods, etc.,

#2. Profits of lenders; lenders need to recoup (million and billion dollar) recent losses and post profits soon. Margins are already razor thin in the financial industry and higher interest rates increase profit margins. Bankers are for-profit workers.

#3. Loan demand is very high now at current (historically low) rates and lenders can't service and fund all loan requests fast enough in light of reduced staffs. Easiest way to slow excess demand is raise rates, eliminate programs, and tighten guidelines.

#4. Limited funding sources; secondary market is limited and also demanding safer and larger returns for buying loans, thus higher rates.

#5. Rising default rates; higher interest rates needed to offset prior losses and mitigate risk of future losses. More defaults=more losses=higher rates.

The new realties of our business are here to stay;

Sorry about the somewhat depressing, albeit real, blog, but I am getting about a dozen calls daily asking why rates are rising....

Hope this helps explain this to some of you and your Buyers....

We're all looking for our next quality deal, so...

Please call or e-mail me if I may assist.