White House, Banks Expand Help for Homeowners
MICHELE NORRIS, Host:
With the housing slump worsening and foreclosures on the rise, the Bush administration announced a new program today to help homeowners. Six major banks pledged to work with more borrowers who got into high interest loans they can't afford.
But NPR's Chris Arnold reports, some housing advocates question whether the new initiative will really do much to help people stay in their homes.
CHRIS ARNOLD: This new plan is basically an upgrade of an earlier one. The first was criticized for being too narrow; struggling homeowners were left out of if they missed payments or if their adjustable rates that already jumped higher. So this new effort aims to help more people.
Treasury secretary Henry Paulson.
HENRY PAULSON: Project Lifeline has a potential to offer new solutions to responsible able homeowners who want to keep their homes.
ARNOLD: The name Project Lifeline certainly sounds dramatic - it involves major banks such as Citigroup, Bank of America, and Countrywide. They're offering, they say in some cases, to delay foreclosure for 30 days to try to renegotiate loans, and they'll do that for all kinds of mortgages. But housing advocates are unimpressed.
Bruce Marks heads up the Neighborhood Assistance Corporation of America.
BRUCE MARKS: They're doing no more now than what a servicer and lender is already doing. It is a public relations exercise with no substance.
ARNOLD: Marks says lenders already have been delaying foreclosures and making loans more affordable; they're just doing it much less than they said that they would.
Eric Halperin is with the Center for Responsible Lending.
ERIC HALPERIN: There's been a lot of these pledges. There's been a lot of press conferences over the last few months about new programs.
ARNOLD: Halperin says when you look at the data, the companies are starting to do a bit more, but they're still falling far short. He says for every borrower in a subprime loan who gets their loan modified to make it more affordable, 13 other people lose their homes.
HALPERIN: And that simply shows that foreclosure is still the way that the most borrowers are having their loans dealt with by their lenders, and so there's nothing in this announcement that appears to change that dynamic.
ARNOLD: Halperin says there's a logjam inside these mortgage companies; some are afraid of lawsuits, their competing interest when a borrower has more than one loan. And while avoiding foreclosures helps most of the investors who own the loans, Halperin says some mortgage servicing companies actually make more money on fees when a foreclosure happens.
HALPERIN: A program that is simply voluntary can break that logjam, and what you need is something that has some keys to it, has some ability to force the hand on some of the participants in the process.
ARNOLD: Halperin says the most promising development right now is a bill working its way through Congress. It would allow homeowners to avoid foreclosure when they declare bankruptcy, judges could then restructure loans as they see fit. Critics worry, though, that it would echo through the credit markets and make borrowing more expensive for everyone.
Chris Arnold, NPR News.
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