Just a few short months ago President Bush stood in front of the press and swore that it was not the federal government’s job to bail out either lenders who made bad loans or speculative homebuyers who purchased more home than they could rightly afford utilizing the so-called “exotic” or “liar loans” popularized over the past few years.

Last week Treasury Secretary Henry Paulson threw out what the administration considers to be a life preserver to homeowners facing foreclosure. In reality what they threw out is no more than a bread crumb. Called “Project Lifeline,” it has the backing of Alphonso Jackson, Secretary of Housing and Urban Development, and Faith Schwartz, Executive Director of the Hope Now Alliance, a foreclosure prevention coalition of the public and private sectors.

The Administration has encouraged six of the nation’s largest lenders — Bank of America, Citigroup, Countrywide Financial Corp., JP Morgan Chase & Co., Washington Mutual and Wells Fargo & Co. — which are responsible for almost 50 percent of all mortgages in this country, to throw at least a bone to as many homeowners facing foreclosure as possible. The homeowners have to be more than 90 days behind on their mortgage payments, and call in once they get a letter from their lender asking them to reaffirm that they want to stay in their home.

On the plus side, the Lifeline program is not being applied to only subprime adjustable-rate mortgages (ARMs). It is also available to borrowers who have Alt-A and prime loans, so that is a good thing.

On the downside, however, the temporary freeze or moratorium they are offering lasts for only 30 days. Plus, the program is not available to borrowers who are within 30 days of the property’s foreclosure sale (in most states known as the Trustee’s Sale or Sheriff’s Sale and normally conducted on the local courthouse steps). This group of people is probably the one which needs this program the most, so long as they reaffirm their desire to continue to own the home.

Many homeowners who could not cure the default once it occurred, nor could sell their property outright given the current state of the real estate market in most parts of the country, wait until the 11th hour before waking up to the reality that they are about to lose their home to foreclosure.

A last-chance opportunity to take a step back and get a final break from the process long enough to consider other financial options may bring some light into an otherwise dark tunnel of financial ruin for these homeowners.  

The Lifeline program is a baby step that simply doesn’t go far enough. It’s a case of too little rope too late, with a life preserver attached that isn’t going to float for many people.

What do you think? Let us know.