From 'Lifeline' to Stabilization

Critics have been swift to point out that the federal government's proposed (and voluntary) "Project Lifeline" does little more than set a "pause button" on at-risk mortgages. What's needed are "Neighborhood Stabilization" plans.

2 minute read

February 15, 2008, 7:00 AM PST

By Michael Dudley


The nation is in a mortgage crisis. More than one out of every 14 mortgages "are delinquent as of the end of September -- a 30-year high." According to the Federal Reserve, "another 2 million families could face foreclosure in the next 2 years." In an effort to stem this tide, Treasury Secretary Henry Paulson this week announced "Project Lifeline," a voluntary private sector initiative. Six major mortgage lenders have agreed to send letters "to truant borrowers detailing how they can 'pause' the foreclosure process for 30 days while the bank evaluates whether they're eligible to modify their loan on better terms." Yet like other Bush administration "solutions" to the economic crisis, this one is nothing more than a short-term "voluntary breather" and would perhaps be more aptly called "Project Band-Aid." "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-IL). "We need a plan that goes further."

The current mortgage crisis needs more than this voluntary, markets-based approach. As David M. Abromowitz and Andrew Jakabovics at the Center for American Progress note, "Markets will do their part, but not if they are frozen by a freefall in home prices that sucks in otherwise responsible homeowners. Homes are not just another commodity; when widespread foreclosures drive whole neighborhoods into rapid decline." During the 30-day pause, banks will presumably modify the loans to make them more affordable in the long term. But if history is any guide, this outcome is unlikely. Lenders did very few loan modifications in 2007, at the height of the foreclosure crisis. Moody's, the rating agency, notes that at the end of September, just 3.5 percent of loans reset in 2007 had been modified. "What they actually will do is anybody's guess," The New York Times concludes about Bush's voluntary program.

American Progress has proposed two plans to restore equilibrium to the housing market. First is the SAFE loan program, which "is modeled after the New Deal's successful Home Owners' Loan Corporation" but uses existing government resources to "purchase pools of loans at current value and refinance those loans that are in default or have negative equity into fully amortizing, fixed-rate loans based on the current value of the property." Second is the Great American Dream Neighborhood Stabilization, or GARDNS, Fund, which would help homeowners in low- and middle-income neighborhoods by providing "money to local housing authorities and non-profit organizations to buy foreclosed properties from banks and return them to productive use as affordable housing."

Thursday, February 14, 2008 in Center for American Progress

portrait of professional woman

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching. Mary G., Urban Planner

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching.

Mary G., Urban Planner

Use Code 25for25 at checkout for 25% off an annual plan!

Redlining map of Oakland and Berkeley.

Rethinking Redlining

For decades we have blamed 100-year-old maps for the patterns of spatial racial inequity that persist in American cities today. An esteemed researcher says: we’ve got it all wrong.

May 15, 2025 - Alan Mallach

Logo for Planetizen Federal Action Tracker with black and white image of U.S. Capitol with water ripple overlay.

Planetizen Federal Action Tracker

A weekly monitor of how Trump’s orders and actions are impacting planners and planning in America.

May 14, 2025 - Diana Ionescu

Front of Walmart store with sign.

Walmart Announces Nationwide EV Charging Network

The company plans to install electric car chargers at most of its stores by 2030.

May 7, 2025 - Inc.

Aerial view of Albuquerque, New Mexico at sunset.

New State Study Suggests Homelessness Far Undercounted in New Mexico

An analysis of hospital visit records provided a more accurate count than the annual point-in-time count used by most agencies.

May 16 - Source NM

Close-up on white bike helmet lying on pavement with blurred red bike on its side in background abd black car visible behind it.

Michigan Bills Would Stiffen Penalties for Deadly Crashes

Proposed state legislation would close a ‘legal gap’ that lets drivers who kill get away with few repercussions.

May 16 - Wood TV 8

Muni bus on red painted bus-only lane in downtown San Francisco, California.

Report: Bus Ridership Back to 86 Percent of Pre-Covid Levels

Transit ridership around the country was up by 85 percent in all modes in 2024.

May 16 - Mass Transit