A lifeline for delinquent mortgage borrowers
By Holden Lewis • Bankrate.com

Mortgage lenders desperately want past-due borrowers to open the mail and pick up the phone.

That's the gist of the latest public-private collaboration to address the mortgage crisis. This week, the federal government and six big mortgage servicers announced Project Lifeline, billed by Treasury Secretary Henry Paulson as "a targeted outreach to homeowners 90 days or more delinquent that may lead to a pause in the foreclosure process."

The initiative is more about the outreach than the pause. Industry experts say that delaying the foreclosure sale of a house is standard procedure when the borrower is willing and able to discuss a workout of some kind. So what Project Lifeline really amounts to is the targeted outreach.

"Project Lifeline is aimed at homeowners who face a real risk of losing their home, but have not yet addressed the problem," Paulson says, adding: "Our hope is that today's announcement will reach them, and they will reach out immediately for help."

In other words, Project Lifeline's goal is for seriously delinquent borrowers to stop ignoring the letters and phone calls from their mortgage companies, and instead call and ask for help.

The project is the offspring of a previous initiative, called the Hope Now Alliance, which focuses on past-due borrowers with subprime mortgages. Hope Now set out guidelines to quickly sort which subprime borrowers don't need help, which can stay in their homes with some help and which are in hopeless situations. Under Hope Now, some subprime borrowers can get the introductory rates frozen on their subprime, adjustable-rate mortgages.

Help for all kinds of mortgages
Project Lifeline reaches out to a broader swath of borrowers. It covers all residential mortgages, not just subprime loans. The project comprises six of the biggest mortgage servicers: Countrywide, Wells Fargo, CitiMortgage, Chase Home Finance, Washington Mutual and Bank of America.

They will send letters to their customers who are at least 90 days past due, offering to put off a foreclosure sale by 30 days if the borrower:

• Calls within 10 days of receiving the letter.
• Expresses a desire to avoid foreclosure and keep the house.
• Agrees to financial counseling, if the lender deems it necessary.
• Provides detailed financial information.