Six of the biggest mortgage lenders in the United States are expected to announce plans today to stop borrowers in danger of defaulting on loans from losing their homes. The plan is known as Project Lifeline.
Analysts at Federal Deposit Insurance Corporation predict that the number of Americans defaulting on their mortgage will be up 166 per cent this year, to 1.6 million.
Bank of America, Citigroup and four other US lenders are to offer a 30-day freeze on foreclosures to help them to refinance their loans, Bloomberg reported this morning.
It is thought that an announcement on the plans will be made in Washington at 4.15pm GMT.
The new move, spearheaded by Henry Paulson, the Treasury Secretary, will see the banks, all members of Hope Now, an alliance of lenders formed last year, provide a lifeline to customers who are late on their payments by three months or more.
As the US teeters on the edge of recession, Mr Paulson, who has previously opposed a stay on foreclosures, is said to have asked the banks to go beyond previous pledges to freeze sub-prime interest rates for the next five years, in an attempt to avert the deepest housing slump in a generation.
JPMorgan Chase, Wells Fargo, Washington Mutual and Countrywide Financial, the other banks in the group, are also part of the plan.
Democrats have heaped criticism on the Bush Administration for failing to provide enough relief to homeowners caught in the global credit crunch.
Barney Frank, the Massachusetts Democrat who heads the House Financial Services Committee, said yesterday: “We are now in the midst of one of the most serious economic crises we have seen in recent years.”
Estimates by the Federal Reserve forecast that about two million US homeowners will see their mortgage repayments soar in the next two years as the price of credit increases.
Borrowers facing the prospect of higher mortgage repayments are also facing the prospect of negative equity, as values of houses dropped for the first time since the Depression.
The National Association of Realtors said that sales of single-family homes declined 13 per cent, the biggest drop in 25 years, as prices plummeted 1.8 per cent, the first drop since records began in 1968.
Patrick Foster
Times Online
http://business.timesonline.co.uk/tol/business/markets/united_states/article3354858.ece
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