WASHINGTON (Reuters) - Six of the largest U.S. mortgage lenders on Tuesday will announce a program to identify seriously delinquent borrowers and halt any foreclosure process while they try to work out a new payment scheme, sources familiar with the plan said on Monday.
The lenders will unite under the program, dubbed “Project Lifeline,” to identify borrowers more than 90 days delinquent and stall any foreclosure proceedings while they try to develop new loan terms, the sources told Reuters.
Executives from Washington Mutual Inc (WM.N), Bank of America Corp (BAC.N), Wells Fargo & Co (WFC.N), JPMorgan Chase & Co (JPM.N), Citigroup (C.N) and Countrywide Financial Corp CFC.N are due to announce the plan on Tuesday morning with U.S. Treasury Secretary Henry Paulson.
A source familiar with the plan said the initiative dovetails with other foreclosure-prevention efforts already under way at many lenders, but said it will give more reassurance to troubled borrowers that they can avoid foreclosure even if they are seriously late with payments.
Lenders do not imagine an open-ended freeze on foreclosure proceedings but rather would offer a reasonable period of forbearance so that lenders can determine if a borrower could manage new loan terms, a source familiar with the plan said.
The plan is scheduled to be announced officially on Tuesday morning at 11:15 a.m. EST by the bank executives, U.S. Treasury Secretary, Henry Paulson, U.S. Secretary of Housing and Urban Development, Alphonso Jackson, and Faith Schwartz, who heads a government-industry foreclosure prevention effort called HOPE NOW.
In early December, the HOPE NOW program helped shepherd an industry “rate freeze” plan that would hold interest rates in place for troubled borrowers who can make initial mortgage payments but would likely lose their home once rates rise under the original loan terms.
The initiative to be announced Tuesday specifically targets “subprime” loans that have recently seen a spike in foreclosures.