In December mortgage lenders agreed to a Treasury Department plan to freeze interest rates or speed up refinancing for hundreds of thousands of subprime borrowers who were fortunate enough to be current on their payments. In order to induce consumers to be proactive with potential mortgage problems, a hotline with a toll-free number was initiated. 36,000 people called this number, but unfortunately only 10,000 have been helped with suggested loan workouts with the aid of this hotline.
Two millions borrowers in the next two years will be subject to rate increases on their adjustable loans, which could dramatically increase the number of foreclosures. Typically not only homeowners lose on a foreclosure, but lenders lose about 50% of the loan amount.
Yesterday, six major mortgage lenders agreed to participate in Project Lifeline: Bank of America, J.P. Morgan Chase, Citigroup, Coutrywide, Washington Mutual and Wells Fargo. These institutions will be sending letters to hundreds of thousands of customers who are currently 90 days late on payments, notifying them that they may get a 30 day reprieve in foreclosure proceedings and renegotiate more favorable loan terms.
Folks, as you can see our nation's banks are becoming increasingly desperate. In the past few weeks, we've witnessed America's largest lenders actually lowering the loan to value ratio on new home equity loans and even shaming many of their existing customers by substantially reducing their line of credit or worse yet cutting off life support altogether. Ironically, they're demonstrating alarming desperation in their attempts to reach first mortgage holders with their so called "Project Lifeline" and even lowering interest rates on loans that are already over 90 days late. Things continue to get worse for America's financial institutions as they attempt to survive the worst credit crisis in world history. How will Ben Bernanke ever bail us out of this one?
Earlier Subprime Rescue Falters - WSJ.com
