Treasury Secretary Paulson & Mortgage Lenders Offer Borrowers A "Lifeline" With "Project Lifeline"

Implications: Bank of America, Chase, Citigroup, Countrywide Financial, WAMU and Wells Fargo are the mortgage lenders who have teamed up with Treasury Secretary Paulson and HUD to provide borrowers facing foreclosure with a reprieve through "Project Lifeline," as mortgage delinquencies climb to over $200 billion. Secretary Paulson is encouraging all mortgage servicers to adopt 'Project Lifeline," to avert more foreclosures and provide refinancing plans for borrowers on the verge of losing their home to foreclosure. Homeowners who are already in active bankruptcy or face a foreclosure sale in 30 days or less, will not qualify for a "lifeline" nor will vacant homes that have been abandoned by borrowers or investment properties. In 2007, more than one percent of all U.S. households were in some form of foreclosure, as foreclosures rose by 7% from 2006 to 2007. In 2007, over 1.2 million homes were foreclosed on and in 2008; approximately two million borrowers could lose their home to foreclosure.

Analysis: Since the Spring of 2007, the FBI and SEC have been investigating subprime lenders and investment banks who have come under scrutiny for selling  securities backed by bad loans, such as SIVs. At issue is whether fraud and insider trading violations occurred in connection with loans made to risky borrowers and investments that spun off from those loans, which inevitably led to the U.S. mortgage meltdown. In the interim, as the SEC and FBI continue their investigations, President Bush launched "Project Hope" to assist subprime borrowers in jeopardy of losing their home to foreclosure and on 2.12.08, Treasury Secretary Paulson, HUD and a team of mortgage lenders including Bank of America, Chase, Citigroup, Countrywide Financial, WAMU and Wells Fargo have teamed up to launch "Project Lifeline," to provide a 30-day reprieve and "lifeline" for borrowers on the verge of foreclosure.

1.  Authorities in NY and CT are investigating whether Wall Street banks hid pertinent information about high risk loans that were bundled into securities and later sold to investors and whether any improprieties occurred

2.  New Century and American Home Mortgage Investment Corporation are some of the largest subprime lenders who have filed for bankruptcy since the mortgage meltdown and Accredited Home Lending Holding Co. was bought out by a private equity firm in 2007, while Countrywide Financial Corporation has been acquired by Bank of America. However, these subprime lenders may be on the FBI's and SEC's "short list" of targeted companies under investigation for the subprime fallout

Takeaway:  Defaults on subprime loans has risen over the past 12 months and appear to be primarily responsible for the mortgage meltdown in the U.S. and the subsequent credit crunch that has disrupted global financial markets. Perhaps Treasury Secretary Paulson, HUD and other private interest groups can provide mortgage borrowers on the verge of losing their homes to foreclosure a "lifeline," with "Project Lifeline."