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The Bush administration, trying to deal with a worsening housing slump, announced a new initiative Tuesday aimed at helping homeowners about to lose their homes. For qualified homeowners, the program will put the foreclosure process on hold for 30 days.
Dubbed Project Lifeline, the new program will be available to people who have taken out all types of mortgages, not just the high-cost subprime loans that have been the focus of previous relief efforts.
Separately Tuesday, Zillow, an online house-valuation company, reported that nearly a third of U.S. homeowners who bought in 2006 and 2007 are underwater, or owe more than their properties are worth.
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About 1.3 million mortgages were delinquent at the end of October, the Mortgage Bankers Association reported.
An extra 30 days
The program was put together by six of the nation's largest financial institutions, which service almost 50% of the nation's mortgages. The lenders include Citigroup, Countrywide, Bank of America, JPMorgan Chase, Washington Mutual and Wells Fargo."This helps to limit future problem loans for banks, maybe," Chris Marinac, an analyst with FIG Partners in Atlanta, told MarketWatch. "But this does not mean a cease-fire has occurred."
These lenders say they will contact homeowners who are 90 or more days overdue on their monthly mortgage payments. They 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 mortgages more affordable.
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Those in bankruptcy, within 30 days of a foreclosure date or who don't occupy the property don't qualify.
"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.
Jackson said the goal was to provide a temporary pause in the foreclosure process, "long enough to find a way out," that would allow homeowners and lenders to negotiate more-affordable mortgages.
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In December, President Bush announced a deal brokered with the mortgage industry that will freeze certain subprime loans, those offered to borrowers with weak credit histories, for five years if the borrowers are unable to afford the higher monthly payments as those mortgages reset after being at lower introductory rates.
"As our economy works through this difficult period, we will look for additional opportunities to try to avoid preventable foreclosures," Paulson said. "However, none of these efforts are a silver bullet that will undo the excesses of the past years, nor are they designed to bail out real-estate speculators or those who committed fraud during the mortgage process."
Zillow's data showed that 39% of buyers in 2006 with a median 10% down payment now have negative equity. For buyers in 2007, 30% have negative equity. In comparison, just 3% of those who purchased in 2003 and less than 1% of all homes, regardless of when purchased, have negative equity.
"With consecutive declines over the past five quarters, we haven't seen the housing market bottom yet, and it may very well get worse before things get better," said Stan Humphries, Zillow vice president of data and analytics.
The fourth-quarter Zillow report taps data for the nation and 125 metro markets, covering 67 million homes.
| Area | Zillow value | 1-year change | Median equity | % with negative equity |
|---|---|---|---|---|
United States | $224,890 | -3.0% | 9% | 30.4% |
Stockton, Calif. | $282,778 | -26.4% | -19% | 77.0% |
Modesto, Calif. | $255,804 | -22.9% | -14% | 71.2% |
Riverside-San Bernardino, Calif. | $320,905 | -17.5% | -5% | 59.4% |
Las Vegas-Paradise, Nev. | $250,214 | -13.8% | -4% | 57.6% |
Cape Coral-Fort Myers, Fla. | $201,723 | -20.1% | 0% | 50.5% |
Phoenix-Mesa-Scottsdale, Ariz. | $225,419 | -12.1% | 1% | 48.6% |
Tampa-St. Petersburg, Fla. | $174,078 | -12.9% | 3% | 44.2% |
Miami-Fort Lauderdale, Fla. | $261,237 | -12.9% | 3% | 43.0% |
San Diego-Carlsbad, Calif. | $457,274 | -10.3% | 6% | 40.0% |
Los Angeles-Long Beach, Calif. | $532,116 | -10.6% | 6% | 38.5% |
| Area | Zillow value | 1-year change | Median equity | % with negative equity |
|---|---|---|---|---|
Asheville, N.C. | $195,262 | 6.8% | 23% | 5.3% |
Florence, S.C. | $107,603 | 4.6% | 8% | 9.1% |
Grand Junction, Colo. | $212,836 | 9.6% | 12% | 9.4% |
Raleigh-Cary, N.C. | $201,028 | 4.7% | 10% | 15.5% |
Tulsa, Okla. | $115,114 | 11.4% | 9% | 17.0% |
Greensboro-High Point, N.C. | $139,768 | 5.5% | 13% | 17.2% |
Oklahoma City, Okla. | $113,476 | 8.1% | 9% | 22.6% |
Anderson, S.C. | $102,408 | 5.6% | 9% | 24.2% |
Augusta-Richmond City, Ga./S.C. | $112,692 | 7.3% | 9% | 25.7% |
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