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Kai Ryssdal: The Bush Administration announced an initiative with six of the nation’s biggest financial institutions today. It will give home owners facing foreclosure an extra 30 days to work out a deal with their mortgage lender.
The program doesn’t just apply to subprime borrowers. It’s available to all kinds of borrowers as the mortgage crisis spreads throughout the housing market.
It’s called “Project Lifeline” but will it really float? Jeremy Hobson reports from Washington.
Regis: You got one more lifeline, Steve.
Guest: We’re going to have to use that phone a friend. This is a million dollars, no messing around.
Regis: Sure. Come on. Who do you want to call?
Jeremy Hobson: That was from Who Wants To Be A Millionaire. Sadly, today’s show is Who Wants To Remain A Homeowner and the one offering the lifeline isn’t TV star Regis; it’s Treasury Secretary Henry Paulson.
Henry Paulson: Project Lifeline has the potential to offer new solutions to responsible, able homeowners who want to keep their homes.
Paulson says the program isn’t a fix for everyone. Paulson says some borrowers in deep water might choose foreclosure and leave lenders with dud investments.
Tom LaMalfa is with Wholesale Access, a research firm that works with lenders. He’s skeptical Project Lifeline will do the trick.
Tom LaMalfa: This is the little Dutch boy putting his finger in the dike and hoping and praying that that’s going to make this problem go away.
Hobson: So, is this a lifeline for borrowers or is this a lifeline for banks?
LaMalfa: I see it as more of a lifeline for banks. I’m not sure how the borrowers are going to benefit from all of this.
MIT Housing Economist William Wheaton says banks don’t want to hold homes whose values are plummeting at historic levels and 30 days won’t solve that problem. So, banks have a real interest in re-negotiating terms.
William Wheaton: To the extent that the time helps people negotiate and bargain, then it may help.
But he says if all Project Lifeline does is forestall the inevitable, borrowers and banks alike will keep sinking.
In Washington, I’m Jeremy Hobson for Marketplace.
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