- Real Estate
Mortgage Relief: Is Project Lifeline a foreclosure solution or....?
Falling behind on housepayments? Read this.
Help for some homeowners is on the horizon. Six of the United State's largest mortgage companies have voluntarily agreed to work with the Treasury Dept. on Project Lifeline. It's a broad reaching precept designed to give borrowers who are at least 90 days behind in payments a 30 day grace period in which the lenders will not foreclose on their homes. It costs the borrower nothing, all they have to do is notify their lender of the desire to work out a solution or otherwise reduce the monthly payment. Note that there may be a lot of ways for a bank to reduce payments but that it might not necessarily be in the buyers best interests in the long term. I'm just saying. Lenders have a recent history of not making all the terms of their "products" easily understandable to consumers. Gee I'd hate to think this might be another opportunity to scrape a little more meat off the bone. And I'm not saying borrowers shouldn't try to get this help, but the program will be watched carefully by the Feds, or so they say, to make sure the program is working...whatever that means.
So......I'm of mixed emotions on this one. On the one hand why shouldn't borrowers who are already in the jaws of foreclosure get a chance to fight for their home? It's bad enough that so many have already gone down the toilet.....and that makes for a lot of bad credit reports. Remember these are the consumers the banks and credit card co's and store and car credit lenders depend on. Down in flames. No more new earnings from them for the lenders...these folks will be paying cash as they go, and the creditors will have to be satisfied with getting paid from old debts that linger after the borrower implodes. They won't go away. But dwindling new business for banks is not something shareholders want to hear.
On the other hand will this move to negotiate between banks and borrowers just stretch out the misery? A certain percentage of these folks are buried in other kinds of credit they got sold on by Mad Ave. "why wait for what you want when we will give you 18 different credit cards, and wait for you to fall behind on payments so we can jack your rate up to 29% apr." These borrowers may get help with their home loan, but it probably won't be enough. You'll see creditors putting liens on those very homes. And other judgements against the people themselves. Think about this: so many employers these days do not run drug or background checks....they run a credit check. The thinking there is that if a person cannot manage their finances, they will not dependable in the workplace. So all thisbad business with bad credit will also eat into workers' potential to find a better job, or replace a lost job. Insidious, huh?
BTW a lot of Realtors will tell you that Project Lifeline is a bad idea and that it will only help a very few. Many would rather see the quick deep cut instead of waiting for the anesthetic to start working. They just want to see the market moving, even if it means at dropped values. But when I think this matter through I come to the conclusion there are a few more dominoes to consider. If all these ill-fated borrowers don't get a grace period to work out a plan, how many homes will flood the market all at once? Realtors may think they want all those listings, but supply will drive down values, and since the lenders are whiplash-reacting so much that even strong borrowers are having trouble getting loans....the listings will sit on the market. No paychecks for Realtors. Unless some investors step up with cash, and/or the banks get over their whiplash reaction to their own self-created disaster....and start lending money again. I know of plenty of strong borrowers and good risks who are having trouble getting loans....how can the banks make new money if they don't start working harder to loan money?
I foresee a lot of folks going into default regardless of the reprieve...there they will be in a dingy apt. (if they can rent one with bad credit, ever think of that? Families on the street?). They'll be going to work every day to pay debts that will linger for years, that they can never get out from under. Since the bankruptcy laws have changed.....there will not be much debt relief unless you are also unfortunate or lucky enough to have huge medical debt. Considering that during the early 2000's "Homeownership for all Americans" was the hue and cry out of DC, mentioned in so many speeches everyone believed it could be real, it is really shameful how so many have been brought to their knees financially. Somebody please tell me this wasn't all calculated to bleed the last drops of blood from consumers.