The Hope Now Alliance, initially a broad-based subprime mortgage rescue effort, is getting an extra lifeline from the mortgage lending industry.
And critics were quick to slap on the same seal of disapproval presented other industry efforts to rescue homeowners facing mortgage meltdown -- too little, too late.
Hope Now was initially created to save subprime borrowers from being pulled under by the weight of rising mortgage payments.
Now the industry group is throwing financial life preservers to prime borrowers and others who also face being submerged by foreclosure.
Prime loans typically go to those with unblemished credit reports and the highest credit scores. Subprime loans are made to those with limited or questionable credit histories and low scores.
The new Hope Now effort, "Project Lifeline," will extend hope to prime borrowers and others who are 90 days or more delinquent. Lifeline offers a 30-day suspension of foreclosure proceedings while the lender attempts an affordable loan workout.
The new effort comes from a group of six banks -- the Bank of America, Citigroup, Countrywide, JPMorgan Chase & Co., Washington Mutual and Wells Fargo.
Also members of Hope Now, the Lifeline group represents 50 percent of the nation's mortgage servicing business. The larger Hope Now Alliance is a group of dozens, including financial counselors, lenders, loan servicers and others from the mortgage industry.
Hope Now claims during the second half of 2007 it helped nearly 870,000 homeowners who had prime and subprime loans keep their homes. The number includes 652,000 repayment plans initiated and 217,000 loan modifications.
Critics were quick to snipe at the mortgage industry effort as a long overdue, but limited effort that's more like a Band-Aid than a life preserver.
Late last year when millions of homeowners were forecast to lose their homes to foreclosure, the California Reinvestment Coalition (CRC), surveyed 33 of California's more than 80 mortgage counseling agencies that offer assistance to financially strained borrowers, and found that most lenders sent defaulting homeowners packing with a foreclosure or short sale.
After Project Lifeline was introduced, U.S. News & World Report's Alex Markels suggested the new program be called "Project Band-Aid," for it's limited appeal in a market of falling prices.
University of California economist James D. Hamilton, in his Econobrowser blog, asserted that a break in the foreclosure process will be helpful only if prices are finished falling, because many homeowners often don't acknowledge the magnitude of their potential loss.
Instead they exhibit what could be considered a rational response when the value of the house falls below the value of the mortgage debt -- they bolt.
Gary Painter, director of research at the Lusk Center for Real Estate at the University of Southern California went further and suggested banks were acting for political reasons.
He told public radio "In general, 30 days is probably not enough time, but we have to think about why are the banks are doing this. Banks are going to do this partially for political reasons given the environment, but you know, banks are in business to make money and I think what they see is this is an opportunity to give some people a little more time where they might be able to work out a plan."
Painter also suggested more attention be paid to the issue of fraud, a key component in the mortgage meltdown.
"Well, I think the biggest thing that public policy makers need to be concerned about is was there fraud in the industry and so was there fraud in terms of the mortgage brokers providing false documentation to those who were buying the mortgages? Was there predatory lending going on in certain situations where people weren't being told all the information about their loan or not told in a way that they could actually understand what was going to be happening with loan. But if there was fraud, and there is evidence that is being accumulated that there was some fraud in the markets, that has to be cracked down on and better, information needs to be given to borrowers," Painter said during the interview.