Lenders Put a Freeze on Foreclosures

Six of the nation's largest mortgage lenders, in a joint effort to cool the raging foreclosure crisis, have agreed to temporarily stop foreclosure proceedings on homeowners who have fallen seriously behind in their house payments.

Under a program unveiled recently, legal efforts to oust seriously delinquent borrowers from their homes will be postponed for 30 days while lenders and borrowers try to work out payment options.

The effort, known as Project Lifeline, will not be confined to borrowers with adjustable rate mortgages.  So-called ARMs have recorded the highest rates of delinquencies, even as default for loans of all types have risen dramatically over the past couple of years.

Under the program, homeowners 90 days or more behind in their mortgages will get a letter from their lenders asking them to call. Borrowers will be asked if they want to stay in their homes; if so, they will be offered financial counseling.

Loan modifications are not automatically granted.  Borrowers will have to provide up-to-date information about their wages and debts.  At that point, the lenders decide whether to pause the foreclosure process.

During the moratorium, foreclosure prevention specialists will determine if there's a good possibility that a loan modification will work. In other words, will a borrower be able to regain his footing and start paying his mortgage again?

Lenders often lose money when they foreclose on and resell properties – an average of $50,000 per home. It's cheaper to work out a deal with defaulting borrowers.