US Project Lifeline to support troubled Homeowners

Project Lifeline is a new plan in the US aimed at tackling housing market troubles caused by irresponsible sub-prime lending. The Bush Administration Project Life line plan aims to help homeowners facing foreclosures and the hope will be that it stems the tide of people defaulting on mortgages.

The plan, announced by the Treasury, and the Department of Housing and Urban Development is aimed at homoweners in default of payments for 90 days or more. Hoemowners in seriouus default who are at risk of foreclosure will have the process paused for 30 days. this period aims to allow borrowers to negotiate with their lenders possible more affordable payment terms. All stages of foreclosure would be suspended during this period.

Six major banks have so far announced their involvement in Project Life Line; The Bank of America, Citigroup, Countrywide Financial, JPMorgan Chase & Co., Washington Mutual and Wells Fargo. Other lenders are being encouraged to participate.

With home prices falling people in trouble with their home borrowing face the prospect that selling will not solve their problems as they will owe more than the value of their homes. The crisis has reached the point where even people with normally good credit ratings have had problems with high mortageg payments.

As in the UK many people took out mortagages which had low interest/ initial payment arrangements in the early part of the mortage with the borrower moving to normal interest/payments at a later point. Borrowers who are moving of the low payments now face difficulties with repayments and find that selling s no longer an option.

The hope in the US will be that ths plan can stem the tide of falling house prices and mortgage defaults and foreclosures.

The housing market in the UK has similar issues with large numbers of eople who are due to move off fiox rate mortages having to face higher payments and sins of weakening in the housing market. In the UK less dramatic action has been taken, and been required, so far and it is unclear yet if the market will require such significant intervention.