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Tuesday, February 12, 2008

Project Lifeline

by Tanta on 2/12/2008 12:48:00 PM

In the beginning, there was a Plan Hope.

Now, there is a Project: toss out a lifeline to those who just dipped under the waves for the third time.

I just listened to the live webcast of the Treasury Department's big announcement. I spent 40 minutes on this. I feel obligated to blog about it.

Project Lifeline involves servicers sending letters to borrowers--prime, Alt-A, or subprime, we're past pretense on that part--who are very seriously delinquent (90 days or three payments down or more). The letter says that if the borrower contacts the servicer within ten days, agrees to homeowner counseling, and provides sufficient financial documentation that the servicer can consider a case-by-case, deep-analysis style modification of the mortgage terms, the servicer will agree to put the foreclosure process on hold for 30 days while the workout is considered. If the borrower fails to respond to the letter, foreclosure proceeds.

The difference between this and the way the loss mitigation process has always worked is . . . the letter part.

What is implied here is that servicers are, in fact, staffed up to do these time- and labor-intensive modifications that include real examination of the borrower's circumstances, real counseling, and loan changes that are much harder to process than just a teaser freeze. They're just waiting by the phone for borrowers to call. Why am I skeptical about that?

Highlight of the whole thing:

Q to Paulson: "Is the worst over?"

Paulson: "The worst is just beginning."

Lowlight: Alphonso Jackson, whose soporific discourse leads the viewer's mind to abandon the struggle to pick content out of the bromides and focus instead on that oddly expressionless, smooth, unwrinkled, ageless baby face of his. What, you wonder, would it take to make this man look a little troubled? Armageddon?

Anyway, Jackson repeated the claim that over 200,000 (I think he said 228,000) applications for refinance have been received by HUD "since the President announced" the FHASecure plan in October. Once again, this statement implies, but does not exactly say, that all 200,000-odd applications were under the FHASecure program, as opposed to being all refinance applications, including those under standard FHA programs that would have been made anyway. And it says nothing about how many cases actually got endorsed.

(Civilians: FHA isn't a lender, so what it really gets "applications" for is insurance of a loan. It calls these "cases." When it insures a loan, it calls that an "endorsement." You need to know the lingo if you are enterprising enough to go root through HUD reports looking to see how many FHASecure loans actually have been endorsed. Good luck to you if you do: I'm having a hard time finding this information.)

Jackson did say that of the 200,000 and some "applications," "over 5,000" involved original loans that were already in default. I'm guessing that the true FHASecure caseload is about, um, 5,000. Anyone with better data is hereby invited to share. Jackson keeps repeating these numbers--which have been questioned before--and nodoby's calling him on it.

(I'll post a link to the transcript whenever it is available.)