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Bank of America, Citigroup and four other
Encouraged by treasury secretary Henry Paulson, the banks will offer a 30-day freeze on foreclosures while loan modifications are considered, two people said on condition of anonymity. The initiative, which follows a week of talks with Bush administration officials, will apply to customers who are at least three months late on payments and include prime borrowers, as well as those with poorer credit histories.
Paulson, who as recently as last month opposed a moratorium on foreclosures, is pushing lenders to go beyond earlier pledges to freeze subprime interest rates for five years. The deepest housing slump in a generation is threatening consumer spending and the job market, pushing the economy to the verge of a recession.
“There is this huge disconnect between what is being represented by the industry and what is being experienced on the ground,” said Kevin Stein, associate director of the California Reinvestment Coalition, a San Francisco-based housing activist group. “Borrowers are falling through the cracks while more and more of these press releases come out. It’s clearly not enough.
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JPMorgan Chase & Co, Wells Fargo & Co, Washington Mutual and Countrywide Financial will also participate in the plan, known as Project Lifeline, the two people said. All six are members of Hope Now, the alliance of lenders, services and counsellors formed last year to head off a surge of foreclosures.
Paulson last week heard complaints from Democrats in Congress that the number of homeowners receiving relief so far has been insufficient. “We are now in the midst of one of the most serious economic crises we have seen in recent years,” Barney Frank, the Massachusetts Democrat who heads the House Financial Services Committee, said in a speech in Boston on Monday.
Federal Reserve officials project about 2 million homeowners face higher mortgage rates over the next two years as their loans reset higher
Economists at the Federal Deposit Insurance estimate foreclosures this year will be about 1 million more than average, a level that FDIC chairman Sheila Bair has said “is just too high”. They average about 600,000 in a typical year. Paulson and Housing and Urban Development Secretary Alphonso Jackson will discuss the plans at a press briefing on Tuesday, in