30-day reprieve on foreclosure

WASHINGTON — Homeowners threatened with foreclosure would in some instances get a 30-day reprieve under an initiative the Bush administration announced Tuesday.

Critics attacked the proposal as far short of what is needed to resolve a serious financial crisis that is threatening millions of families with the loss of their homes.

Under the new program, six of the nation's largest financial institutions said they will begin contacting homeowners who are 90 or more days overdue on their monthly mortgage payments. The homeowners will be given the opportunity to put the foreclosure process on pause for 30 days while the lenders look for a way to make the mortgage more affordable.

The new program will be available to the holders of all types of mortgages, from prime to subprime, and represents a widening of an initiative announced by President Bush in December. That earlier initiative offers a freeze on subprime mortgage rates that are scheduled to reset to sharply higher rates for borrowers who qualify for the assistance.

While saying the 30-day pause in the foreclosure process was not a silver bullet, Treasury Secretary Henry Paulson said it could give borrowers valuable time to work out refinancing terms with their lenders. However, lenders would not be required to offer any more favorable financing terms than they are already offering to borrowers in trouble.

Critics said much more assistance will be needed to prevent what is expected to be a tidal wave of foreclosures in the coming two years.

"A month-long moratorium on mortgage foreclosure is like a Band-Aid when the patient really needs surgery," said AFL-CIO President John Sweeney.

"Homeowners at risk of foreclosure are floating 50 feet from shore, while Project Lifeline throws them a 30-foot rope," said Sen. Dick Durbin, D-Ill. Durbin is pushing legislation that would let homeowners facing foreclosure alter the terms of their mortgages in bankruptcy proceedings to make their payments more affordable, something current law does not allow.

Senate Banking Committee Chairman Christopher Dodd, D-Conn., who will hold hearings on the housing crisis with Paulson and Federal Reserve Chairman Ben Bernanke on Thursday, said the administration should consider his proposal for a Homeownership Preservation Corp. The corporation would buy mortgages at steep discounts from mortgage firms and banks and then rework the loans based on the reduced value of the properties, making the payments more manageable.