With mortgage defaults surging and politicians urging the industry to do more, six lenders agreed to widen their effort to help borrowers of all loans - NOT just subprime.The plan, called Project Lifeline, is to be announced Tuesday by the Treasury Department and the Department of Housing and Urban Development.

The plan will allow seriously overdue homeowners to suspend foreclosures for 30 days while lenders try to work out more affordable loans.

On a pilot basis, the plan will involve six of the largest mortgage lenders, in hopes that more lenders will sign on. The participants are Bank of America Corp. (BAC, Fortune 500), Citigroup Inc. (C, Fortune 500), Countrywide Financial Corp. (CFC, Fortune 500), JPMorgan Chase & Co. (JPM, Fortune 500), Washington Mutual Inc. (WM, Fortune 500) and Wells Fargo & Co. (WFC, Fortune 500)

All six are involved in Hope Now, a Bush administration organized effort to freeze rates on some high-cost subprime mortgages for five years to aid borrowers whose teaser rates are jumping sharply higher. Since then, Treasury Secretary Henry Paulson has urged lenders to expand that effort to cover struggling homeowners with conventional mortgages.

The new plan applies to seriously delinquent homeowners, those whose mortgages are 90 days or more past due.

The Hope Now alliance, which includes lenders, investors and nonprofit groups, said last week that it helped nearly 8% of subprime borrowers in the second half of 2007 - more than its original estimate.

The group said it helped 545,000 subprime borrowers with spotty credit in the second half of last year, compared with its January estimate of 370,000. That works out to 7.7% of 7.1 million subprime loans outstanding as of September 2007.

Among the subprime borrowers aided, 150,000 were helped through permanent-loan modifications, such as lower interest rates, while 395,000 negotiated repayment plans, which often involve a borrower getting back on track even after missing a few payments.

Consumer groups, however, point out that many borrowers still can’t keep up, even after loan workouts. They say many of the borrowers in the Hope Now effort have negotiated short-term loan modifications or repayment plans, which often involve a borrower getting back on track after missing a few payments. A full-fledged refinancing at a lower rate is preferable, they say. 

 Homeowners behind in payments will get 30 days to work out problems

cnnmoney.com

So there are even more changes coming for lenders and borrowers.  One that will help make borrowing easier.  FHA loans, which are an entry level loan for MANY borrowers, is about to change how it does business.  For starters, they will be changing their limit on how much they can lend to be equal to the ‘Conventional Conforming’ limit.  For Maricopa County Arizona, that limit is $417,000.  As you can imagine, this gives FHA borrowers much more buying power.  Typically, borrowers were limited to around the $250,000 range.  Also, they are reducing the required minimum down payment to 1.5% down from 3%.  This makes the hard topic of down payments slightly more within reach.  For a $200,000 home, the down payment changes from $6000 to $3000.  Down payment gifts will still be allowed.  FHA makes it much easier in that it is not driven as much by a borrower’s credit score.  Hopefully, soon these will take affect after our Congress is done with fine tuning them!

All in all, there have been many changes that have made loans much harder to get.  Hopefully these types of changes will offset some of the difficulties.  Stay tuned for more developments…..