A 30-day reprieve from foreclosure for some homeowners

A group of major mortgage lenders announced a new effort Tuesday aimed at ameliorating the growing nationwide foreclosure problem.

The plan, called Project Lifeline and announced by the Treasury Department, applies only to borrowers already in deep trouble, having missed more than three months of mortgage payments.

The borrowers would get a 30-day reprieve from foreclosure action in which participating lenders would try to work out a more affordable payment. But there is no requirement for the lender to do so, and it was unclear how many borrowers might receive help.

Wells Fargo & Co., the largest mortgage lender in Minnesota, has added staff to mortgage offices and call centers across the country to handle the increased calls from borrowers with troubled loans, said Mary Coffin, Wells Fargo Home Mortgage executive vice president of loan servicing.

"Our phones are ringing off the wall," Coffin said in a conference call with reporters.

The numbers back up her impression.

In 2007 the number of foreclosure filings in the Twin Cities metro area increased 147 percent from 2006, according to report released Tuesday by RealtyTrac. The 12,755 foreclosure filings for the metro area during the year represented 0.8 percent of all households. The Twin Cities ranked 60th among the nation's 100 largest metro areas in terms of the number of properties at some stage of foreclosure last year.

Coffin stopped short of saying how many Wells Fargo borrowers are likely to be helped by Project Lifeline. But she brushed aside critics who've said banks have been slow to offer substantial relief to large numbers of debtors.

"There is not a silver-bullet answer to this that just wipes all these foreclosures away," she said.

Plymouth mortgage banker Alex Stenback is among the new program's skeptics.

"It's PR," he said.

Staving off immediate foreclosures by freezing adjustable rates or refinancing mortgages will provide small comfort to borrowers seeing the value of their real estate plummet and their incomes hit by a slowing economy, he said.

Project Lifeline, he said, comes down to a simple question: "It's who will we foreclose upon now and whom will we foreclose on later?"

U.S. Bancorp did not take part in Project Lifeline or Hope Now, a separate group of 25 lenders offering help to troubled subprime borrowers. The reason? Only a tiny share of its lending involved subprime mortgages -- about 2 percent of total assets, said Vice Chair Richard Hartnack.

"I'd guess our subprime portfolio is probably the highest quality of any lender," he said. "We don't have as many cases to deal with and we don't have as many dollars at risk."

Nevertheless, he said, the bank has contacted borrowers with overdue mortgages and offered assistance. U.S. Bancorp might still join the Hope Now effort, he added, in order to present a "more united industry front, to make sure nobody thinks we're on the outside looking in."

Program has limits

Bankrupt homeowners, those who face foreclosure within 30 days, and borrowers who bought investment or vacant properties will not qualify for assistance.

"None of these efforts ... will undo the excesses of the past years, nor are they designed to bail out real estate speculators or those who committed fraud," Treasury Secretary Henry Paulson said at a news conference in Washington on Tuesday. "These efforts are to help American families who both want to and can, through a loan modification or refinancing, stay in their homes."

Unlike previous government-led efforts, the plan will apply to all borrowers, not just those with subprime mortgages. The participants -- Bank of America, Citigroup, Countrywide Financial, J.P. Morgan Chase, Washington Mutual and Wells Fargo -- pledged to mail further information to qualifying borrowers.

New loan arrangements would be worked out on an individual basis. Floyd Robinson, who oversees consumer real estate services at Bank of America, said his bank would "certainly be willing" to consider writing off substantial portions of some mortgages.

Some who follow the financial industry were skeptical about the plan's ability to ease housing's larger problems.

"This is like giving six students a homework assignment but not requiring that they turn in the assignment or even report on its progress," wrote Ted Lieu, a Democrat who is chairman of the banking and finance committee of the California State Assembly. "The banking industry's track record of following through on [its] public commitments to help homeowners has been -- to put it charitably -- sorely lacking."

The plan follows a program announced in December by the Bush administration to freeze interest rates on certain subprime loans.

Compiled from reports by Staff Writer Mike Meyers and the New York Times News Service.