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Mortgage delay rules approved by alliance

February 20, 2008|From Reuters

WASHINGTON — All members of the Hope Now alliance of mortgage lenders and servicers have agreed to adopt guidelines for a 30-day "pause" in foreclosure proceedings to help seriously delinquent borrowers modify their mortgage terms, the alliance and the Treasury said Tuesday.

The move expands an initiative announced last week by the top six mortgage lenders to dozens of other companies that represent about 90% of the sub-prime mortgage market and nearly 70% of the entire mortgage market, the Treasury said.

The initiative, called Project Lifeline, offers homeowners who have missed three months of mortgage payments a 30-day delay in foreclosure proceedings if they seek help in working out new, more affordable loan terms.

The lenders said they would send a special letter to delinquent homeowners under the program, which covers most loans, including prime, "alt-A," sub-prime and second mortgages.

"This is a last-ditch effort to get to people that are 90 days delinquent in their mortgage payment," Treasury Secretary Henry M. Paulson Jr. said. "The industry leaders came in last week, now the rest of the industry has come in behind them."

The Treasury-backed Hope Now alliance was created in October to bring together mortgage lenders, servicers, investors and counselors to help sub-prime borrowers modify their loans, including freezing some rates at their initial "teaser" levels.

Some U.S. lawmakers criticized the Project Lifeline effort last week, saying it did not go far enough to stem a rising tide of foreclosures caused by the resetting of adjustable-rate mortgages to unaffordable levels.

An estimated 1.5 million sub-prime mortgages will reset to higher rates this year.

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