The New York Times

February 13, 2008 Wednesday
Late Edition - Final

SECTION: Section A; Column 0; Editorial Desk; EDITORIAL; Pg. 24

LENGTH: 415 words

When pressed by government officials, the mortgage industry has repeatedly pledged to modify the loans of at-risk borrowers.

In May last year, Senator Christopher Dodd,chairman of the Senate Banking Committee, convened a group of major banks and loan servicers that promised to ''create a permanent solution,'' wherever possible, for troubled subprime borrowers. Then there was Hope Now, created last October and, now, as of Tuesday, Project Lifeline, both created at the urging of the Bush administration and both involving mortgage industry honchos promising to help hard-pressed borrowers.

If the industry had kept the promises they made last May, the other two efforts might not have been needed. So it's unclear why the administration continues to believe that urging the industry to do more is the most effective way to cope with the foreclosure crisis. The industry, for its part, has earned the skepticism that has greeted its serial promises.

Under Hope Now, the industry has said it would freeze the interest rates on many subprime loans starting this year. But the group is not expected to report reliable results until sometime in March, at the earliest. Under Project Lifeline, banks are promising to delay foreclosure proceedings for 30 days for delinquent borrowers with both subprime and higher-quality loans. During the pause, the banks would presumably try to modify the loans to make them affordable over the long run. What they actually will do is anybody's guess.

We do know that 1.6 million borrowers defaulted on their home loans last year and millions more are anticipated in the next few years. Even if the industry-led efforts were very successful, a big if, they're not expected to be anywhere near enough help to stop the damaging fallout from widespread foreclosures -- on neighborhoods, cities and the broader economy.

On Thursday, Treasury Secretary Paulson, who took a leading role in creating Hope Now and Project Lifeline, is scheduled to testify before the Senate Banking Committee. The members of the committee should quickly disabuse him of any notion he may have that he's doing enough. He should be asked to explain, specifically, what will be different at the end of Project Lifeline's 30-day timeout. The only acceptable answer would be widespread modifications that reduce loan balances, reduce interest rates or extend the terms of the loans. And the committee should make clear that it is moving ahead with other more forceful solutions.