Solution to the mortgage crisis: Project Lifeline

Project Lifeline has been formally announced, and it’s being touted as another way for homeowners to avoid foreclosure. Like it’s counterpart, Hope Now, Project Lifeline is another “relief” program designed to soften the economic impact of the sub-prime mortgage crisis.

Here’s what was announced on the AP News Wire:

Homeowners threatened with foreclosure would in some instances get a 30-day reprieve under an initiative the Bush administration announced Tuesday.

Dubbed “Project Lifeline,” the program will be available to people who have taken out all types of mortgages, not just the high-cost sub-prime loans that have been the focus of previous relief efforts.

The program was put together by six of the nation’s largest financial institutions, which service almost 50 percent of the nation’s mortgages.

These lenders say they will contact homeowners who are 90 or more days overdue on their monthly mortgage payments. The homeowners will be given the opportunity to put the foreclosure process on pause for 30 days while the lenders try to work out a way to make the mortgage more affordable to homeowners.

“Project Lifeline is a valuable response, literally a lifeline, for people on the brink of the final steps in foreclosure,” Housing and Urban Development Secretary Alphonso Jackson said at a joint news conference with Treasury Secretary Henry Paulson.

In coming days, lenders will begin sending letters to homeowners who might qualify for the new program. Homeowners won’t qualify if they have entered bankruptcy, if they already have a foreclosure date within 30 days, or if the home loan was taken out to cover an investment property or a vacation home.

Ah, there it is…. the stipulations! Remember the issues with “Hope Now”? Well, we’ve got the same problems here. Are you less than 30 days behind? Don’t bother calling, you’re not in enough trouble yet as far as they’re concerned.

Is your foreclosure date less than 30 days away? OOPS, tough luck for you, too! If the home is Vacant, Secondary, or Investment, you can’t use this program, either. Oh, and it’s only a partnership with 6 different financial institutions, so what happens if they’re not the ones holding the note?

So let’s say you do meet the criteria, what the heck can this program actually do for you?!? Well, it gives them the chance to “freeze” the foreclosure for 30 days while you try to work with the lender to make the mortgage more affordable.

Let’s see here….. You’re 90+ days late on your mortgage, you credit score is getting tanked by the lender, and they’re going to hold off on taking your home for 30 days to help you refinance into an affordable note?!? It seems to me that anyone in this situation is going to have a tough time trying to refi because the foreclosure is beating up their credit score and debt to income ratio (DTI)!

It sounds to me like this is another crappy plan with a very limited scope. It feels like lenders and the government are rolling out initiatives like this one and Hope Now to improve their poor public image. If you want to help consumers, great, but DO IT! Don’t keep rolling out plans that are so limited and complicated that makes the plan so difficult to use.

I don’t like the idea of spending time and money to craft complicated programs that won’t make a significant impact. That money could be far better spent help people avoid falling behind in the first place, but nobody’s managed to roll out that plan yet. On second thought, if a plan were to be developed to help prevent delinquency, the eligibility requirements would probably be just as limited as the current plans. Maybe the next plan should be for Red-headed lefties between 5’10″ and 6’2″ and a slight lisp! You might just be able to get more people to qualify that way!