News stories and studies reporting the dramatic decline in the economy are poor substitutes for the actual experiences people are going through. Job losses, foreclosures, evictions, and the lack of "promised" government services are just a few of the phenomena of the current depression. As well, new tactics of governments and banks to make the downturn as painful as possible on the people are being discovered everyday.

Take, for instance, the following report from Vanguard on the state of the local economy, housing market, and government of Las Vegas, Nevada. For homeowners or people leasing properties, the first ten minutes are especially relevant.

During the boom years, thousands of people were moving into the area every month. Now, with the collapse of the economy, just the opposite is the case, with thousands moving out before they are evicted from rentals or foreclosed homes.

The most disturbing part of the above video, though, is the so-called "immediate eviction" of the family of renters, who were given no notice that they were to be removed from the property. The former homeowner did not tell them the house had been lost to foreclosure, the new bank owner did not inform them, and the county sheriff's office itself did not post a notice on the house days before announcing the eviction.

In effect, the family was given roughly twenty minutes to move out as many of their belongings as possible before all of the locks were changed and the sheriff's deputies moved on to the next eviction, of which this was just one of sixteen total that day. That means, even in a best case scenario of eight hours of work with no driving time lost between lockouts, people are given an average of a half hour to move out. With no notice!

This is really theft, pure and simple. The former homeowners are negligent and immoral in not informing renters of the eviction. The banks are as cruel as ever in wanting the home back without caring whether people leasing are informed or not. And the bureaucrats are more interested in following their marching orders from the bank-owned courts and banks themselves in giving no notice before an eviction.

Just like with forfeiture laws or armed criminals robbing people with the threat of jail time if they do not give up cash or belongings, this immediate eviction procedure is little more than a way for local governments to engage in "legal" theft from tenants who have lost everything, have nowhere to go, and can not afford legal or political representation.

Any and all renters should be aware of the possibility of their landlord being in foreclosure and having the county sheriff's office come to their door to perform an immediate eviction. Nevada is not the only state where this process is allowed (as a search of Google will reveal), and it is up to every tenant to protect their families and properties from the negligence of landlords, the cold indifference of banks, and the theft of government.

The government was to have saved us all from the housing crisis. They were going to stabilize high prices, make housing affordable for low income borrowers, and help foreclosure victims stay in their homes. Nearly half a dozen plans were put into place to make sure that borrowers could not only avoid foreclosure but keep on borrowing money to purchase or refinance properties. What went wrong?

According to a new report by Fitch Ratings, between 65% and 75% of modified subprime mortgages may redefault within twelve months of the modification agreement. This is despite efforts by the government and the banks and the servicing companies to provide assistance (some of it by taxpayers). But what is the real problem with these modification plans -- why do homeowners fall behind again so soon?

One of the main reasons, of course, is that the properties whose loans are modified are still worth less than the total amount owed on the mortgage. Homeowners who get a reduced payment on a house that they still owe far more on than it is worth still have little incentive to reward the banks with so much money for homes they feel they were tricked by the mortgage and real estate professionals into purchasing in the first place.

Reductions of principal balances are exceedingly rare for lenders when working with homeowners. The lenders do not want to write down the value of a significant number of loans as well as reduce payments for the borrowers, because this will drastically reduce the value of the mortgage on the bank's balance sheets. But many homeowners seem to be choosing foreclosure over paying hundreds of thousands of dollars to the banks.

Another reason that loan modifications fail so often is that homeowners do not work out beneficial ones with their lenders. In fact, most are offered repayment plans instead of true modifications, which can actually increase the monthly payment while not reducing the interest rate or principal due on the loan at all. It is no wonder that borrowers facing financial hardships fall behind on more expensive mortgage payments.

In an economic climate defined by rising unemployment and underemployment, even families that originally qualify for a modification agreement may find that the mortgage is unaffordable after a layoff or cutback in hours. While one foreclosure may motivate borrowers to try to save their homes any way possible, a second one may convince them that renting is a better option after all.

The fact that the government has been appropriating so much money to propping up failed financial institutions and other corporations means that fewer resources can be used by successful companies to hire or expand business. And the $12 trillion in new money created by the Federal Reserve has ensured that prices for consumer goods are remaining stable or rising, not falling as they should during a depression.

What homeowners' goal should be when negotiating for a modification is a mutually beneficial plan that is both affordable and a reasonable price for the property. While this is often easier said than done, with the right amount of persistence and advice (although preferably not from a failed government plan's bureaucrats), it is possible to end up with a modification without a 75% chance of being defaulted on.

Homeowners who are facing foreclosure often have to make some very difficult decisions about their current financial situations, how to deal with the mortgage, and future economic prospects. Unfortunately, though, too few borrowers ask themselves the tough, important questions that would provide them with the best chances of long term financial success. A foreclosure situation can be a good time to reflect on these issues.

The first concern homeowners should have when researching how foreclosure works and various solutions is why they are seeking this advice and knowledge in the first place. Is it because they are looking for options to save the home? Or maybe just to sell or give up the property and walk away? Are the borrowers concerned about a deficiency judgment if they walk away or do they even know if this would be allowed in their state?

For homeowners who are already working with their lender or a foreclosure assistance company, they may just want more information about the process of modifying a loan or otherwise negotiating with a bank. Learning how to stop a sheriff sale on short notice is also useful, depending on the circumstances. But until homeowners know why they need foreclosure advice, it is difficult to find the specific information that would help them most.

Another primary issue worth reflecting on is if the homeowners want to sell or save the home, and what their options are in either case. Furthermore, while they may want to save their home, if they are unable to work out an affordable method of doing so, it may be better to sell. But if the market has declined, selling may also be a difficult option, which may force homeowners to file bankruptcy or give the bank a deed in lieu.

Also, homeowners should take some time to consider why they fell behind in their mortgage in the first place. If it was due to a short term hardship that they did not prepare for, it may be wiser to establish an emergency fund to make sure the situation is unlikely to happen again. Rather than clutching at any desperate attempt to stop foreclosure, it may be better to give up the home and rebuild their financial lives.

On the other hand, if the borrowers did have a savings plan and just ran out of funds due to a longer term economic change, it may be necessary to give up the home unless there is enough income to pay the mortgage and get back on a savings plan. But having a home without savings is just an invitation for the next emergency to turn into another devastating financial hardship.

A final consideration may be for homeowners to determine what the chances really are of dealing with all of their debts. If it is not possible to settle with unsecured creditors, filing Chapter 7 bankruptcy may be the best solution, whereas a Chapter 13 may be in order if the borrowers want to use federal court protection to pay back their debts to the greatest extent possible.

While there are many, many issues to think about when facing foreclosure, too many homeowners just jump into an expensive loan modification or repayment plan, go straight for bankruptcy, or simply abandon their homes. This often results in borrowers taking out more loans or extending themselves even further financially, with no better result than delaying the loss of the home by a few months. This is an unfortunate resolution to foreclosure and can be avoided with some thought and planning.

It would seem that the media and court judges were the last two groups to realize that lawyers pursuing foreclosure against homeowners on behalf of insolvent banks routinely lie in order to push lawsuits through the court system. Homeowners attempting to work out alternatives to foreclosure have known for years through direct experience that it can be extremely difficult to deal with a law firm when attempting to save a home.

But the reasons that lawyers engage so widely in this practice are not clear, even though close to 75% of mortgage foreclosure lawsuits inspected have errors or abuses. Beyond simple greed and laziness, though, there is usually more incentive to proceed with a fraudulent or mistaken foreclosure, rather than take the time to make sure the paperwork is in order, the bank has a real case, and it is clearly laid out to the court.

One of the first reasons for so many banks and lawyers initiating lawsuits with poor quality has been the dramatic rise in the foreclosure rate, which has taken vast extra resources to address. But servicing companies and banks have simply do not have the extra money, time, and staff to dedicate towards solid loss mitigation efforts.

The most that lenders have done is to shorten the time that is taken in beginning collection efforts and the foreclosure process. Years ago, banks would wait close to 45 days after a payment had been missed to begin calling borrowers. Today, collections departments will begin calling within 15 days of a missed payment. As well, homeowners used to be able to expect around 10 calls a month -- today it is closer to one every day or more often.

The law firms that are hired to pursue these foreclosures in court have also been caught unprepared for the rise in delinquency rates. Although no one in America is under the impression that we need any more lawyers, the rising foreclosure rate has caused existing foreclosure and collections attorneys to become careless about the quality of the documents filed in court.

Even worse for the lenders and lawyers is that many owners of loans will actually penalize law firms that take too long with the foreclosure process. A flat fee may be paid to the attorneys for an expected amount of work, and any delays or extra work required will not be paid. This makes it more likely that the lawyers will try and file anything, even if it is based on lies or mistakes, rather than take a pay cut.

The government-sponsored enterprises have these types of policies that offer a set fee to law firms for foreclosure actions and will not pay over and above that amount. They also stipulate that the foreclosure process must take no longer than a certain amount of time. Any work or time that is required of the lawyers after this will not be paid. This gives an even stronger incentive to proceed with poor quality lawsuits.

Furthermore, if homeowners are surprised at the lack of communication skills banks and servicing companies have when dealing with borrowers, they should be aware that banks exhibit this same inability with the law firms they hire to file lawsuits.

Often, homeowners may be trying to work out a solution to foreclosure, such as a short sale or mortgage modification, but the lawyers will go ahead with the foreclosure process anyway. In fact, the borrowers may be told by the bank that the process is on hold, while the law firm is never instructed to delay pushing the property towards a sheriff sale and eviction. This is a common communication breakdown.

A final problem is that the legal process may begin even before the lender or servicer is technically allowed to begin loss mitigation talks with the borrowers. Often, the file will be sent to the attorneys to begin preparing lawsuit documents within a couple of months after default, but the lender is not authorized to offer a modification until three months of payments have been missed.

All of these circumstances combine to give law firms hired by servicing companies more financial incentive to file fraudulent lawsuits against borrowers. The fact that these attorneys know that local courts are swamped with foreclosure cases and homeowners rarely show up for hearings are additional incentives -- their frauds or mistakes are unlikely to be discovered or pointed out by defendants.

For all of the bailout money being given to banks, it seems that more credit should be available to potential borrowers or, at the very least, huge Wall Street firms should not have gone out of business or converted to a different type of bank. But this has not been the case -- despite hundreds of billions of dollars directly handed over to the banking system, the only result has been fewer loans being made and more insolvent banks.

One reason for this seeming contradiction (taxpayers forced to make investments in banks, while lending is down anyway) is that many of the bailouts are being given to institutions that did not make direct loans to homeowners or borrowers anyway. These investment banks participated in a different part of the lending process than the commercial banks that typically make loans to consumers.

In fact, is is the commercial banks that most of us refer to when speaking about "the banks." But commercial banks can offer two types of services, called retail banking and commercial banking. Most large commercial banks participate in both types of financial transaction.

Commercial banking refers to dealing with large corporate or business banking transactions. Many of the largest banks are also the depositors for the largest corporations in the world and finance the construction of new locations for retailers, new plants for industry, or expansion plans.

On the other hand, retail banks make loans to and receive deposits from consumers. Of course, some of the same commercial banking giants are also retail banking giants. Many of these large banks have credit card and home lending divisions, as well as offering checking and savings accounts.

Most homeowners should be familiar with a commercial or retail bank, as these are the financial institutions they are most likely to pass everyday on the way to work or the grocery store. During the housing boom, these banks, depending on their size, were often more prudent in their lending decisions, as they were using their depositors' money to make mortgages and the risk of failure was increased for making bad loans.

The largest commercial banks, though, such as Citigroup, while also offering loans directly to consumers, also participated in the subprime lending market or invested in the securities created by investment banks out of subprime mortgages. Once the downturn in the housing market came, these banks were suddenly experiencing huge losses due to foreclosure and the evaporation of value of these mortgage securities.

While commercial banks are typically referred to as "the banks,' investment banking firms have typically been referred to as "Wall Street," due to the presence of the largest firms right in the heart of the largest financial sector of country in New York. By now, all of the largest investment banks have been absorbed by other companies, filed for bankruptcy, or been converted into commercial banks.

The role of investment banks in the economy, though, has typically been to issue and sell securities. They do this in the equity (stock) and bond markets. These companies also help companies raise funds for mergers and acquisitions, or provide consulting advice to such companies attempting to engage in the types of transactions listed here.

During the real estate bubble years, Wall Street investment firms acted as middlemen, funneling money from investors to subprime lenders to consumers, and then buying back the mortgages created, securitizing them, and selling them back to investors. At each step of the way, the investment banks took a share of the transaction, which greatly increased profits for the institutions.

Unfortunately, Wall Street did not want to recognize that the loans being created by the lenders were built on very shaky foundations. In fact, the success or failure of these companies started to depend to a great degree on the performance of loans made to people who could never afford them. This was a recipe for disaster once the housing market took a turn for the worse, and has resulted in the collapse most people could have predicted.

Congress and the Federal Reserve have made available more than $12 trillion for the "banking system" by now. These funds have mostly gravitated towards the investment firms in order to paper over their huge losses in subprime and derivatives investments, rather than going to commercial banks. But this may be a good thing, as $12 trillion created by the Fed can translate into close to $120 trillion by the banks.

But this is also why homeowners and American consumers are witnessing stable or rising prices when they should be falling as a result of the recession. The politicians and economic planners are create huge amounts of inflation, which is propping up prices, but none of this newly created money is making its way to small businesses or consumers. So the people pay for the inflation tax and receive none of the benefits.

The government, since the financial crisis began, has been offering one preposterous foreclosure help program after another in a blind attempt to keep property owners in their homes. All the while, the same banks and companies that helped set the mortgage market up for failure have been given essentially free handouts from Congress.

The latest government failure to be discovered is Fannie Mae's HomeSaver Advance program, which was begun over a year ago in February 2008. The brilliant plan was to allow servicing companies to give homeowners in financial hardships and facing foreclosure a personal loan. The idea was to give homeowners a line of credit they could tap into to pay their mortgages until they were back on their feet financially.

Hopefully, most people by now realize that a problem caused by too much credit and too little income can not be solved by more credit and an unchanged income. But this was the course of action that Fannie Mae embarked upon to assist borrowers in default of their home loans.

Now that Fannie Mae and Freddie Mac have become government run corporations, the failure of such programs costs American citizens directly, as they are providing some of the funds to bail out these companies and keep government foreclosure assistance operations going. And just as with a number of the other government solutions to foreclosure, Fannie Mae's HomeSaver Advance has been a disaster.

Close to 70% of the personal loans made through the program are redefaulting, putting the homeowners back into foreclosure. The only difference now is that they have even more debt to default on, and the American government has even more Fannie Mae debt on its balance sheet.

It seems that, with each new failure of a program to help homeowners in foreclosure, the American people have more of their money taken from them to provide additional funds to the companies or organizations offering the failing programs. And while all of these programs have benign-sounding names, they are offering little more than a false sense of security to borrowers who later fall back into foreclosure.

After the failure of this program, Fannie Mae has begun shifting its resources in the direction of mortgage modification programs, rather than extending personal loans to foreclosure victims. If the government's previous modification numbers are any indication, this move will result in an additional 10-20% of homeowners receiving assistance.

Of course, this still leaves 50-60% of homeowners receiving government sponsored or guaranteed modification programs back in foreclosure within six months. But at least it is not a 70% redefault rate, as with the HomeSaver Advance program.

Maybe, if the government comes up with enough foreclosure assistance programs, it will finally hit upon one that allows borrowers who can afford to pay their mortgages do so, and allows homeowners who can not keep their homes not become a huge drag on the housing market or economy in general. I am doubtful of this result, however.

Instead, the politicians seem to think that they can run the mortgage markets better than anyone, despite 50-70% redefault rates, allocating more than $300 billion to help a single homeowner, decrying "frozen" credit markets while imposing new limits on consumer lending, and taking resources from productive consumers to prop up bankrupt industries and companies.

But who knows? Maybe a relative handful of experts knows more about the economy than all the rest of us combined.

Homeowners can use mortgage servicing fraud and abuse practices as a defense to stop a foreclosure lawsuit. Once mortgage loans are originated, they are frequently packaged and sold off to investors. While no one may really know who owns the loan, the rights to collect the payments are transferred to mortgage servicing companies. These companies are one of the greatest perpetrators of abuse and fraud against homeowners, as they have very little incentive to do right by the borrowers.

These companies are typically paid a flat fee by the trustees of the mortgage to administer the loan, collect payments, make sure property taxes and insurance are in place and paid through escrow, and pursue any foreclosure proceedings, if necessary. If homeowners do miss payments, the servicer gets paid anyway, and actually makes more money from a foreclosure than if they offered to work closer with the owners of the property to negotiate for a mortgage modification or other workout option.

That's right -- mortgage servicing companies actually lose more money when they help homeowners modify loans and save their homes from foreclosure! The fewer resources they dedicate towards loss mitigation and assisting borrowers, the more of the flat servicing fee they get to keep for themselves.

Of course, the parties on either side of the mortgage -- the homeowners and the holders of the loans -- lose far more in a foreclosure than a loan modification. But with a servicing company in the middle of the deal, it is more profitable to let a house go through the entire foreclosure process than to assist the borrowers in making the payments more affordable.

Servicing companies have also been found to "push" homeowners into foreclosure in a variety of abusive ways. If they are not pushed straight into foreclosure, the companies may covertly charge fees and extra interest, or credit payments late. If the owners ever do miss a payment (and many loan servicers only purchase rights to loans that are subprime or have higher risks of default), a foreclosure will quickly result and the costs to reinstate the loan may be astronomical.

The following is a list of the top seven most common mortgage servicing abuses that homeowners will run into. However, the ways that fraudulent companies can take advantage of borrowers are nearly endless, so if homeowners believe that they have been defrauded, they should take appropriate actions in court and with state and federal regulatory agencies. The more that they can discover about how their loan has been handled by a servicer, the better chance they have of proving servicing abuse and other related charges in a court.

• Junk fees masquerading as legitimate. These may include property inspection fees, broker price opinions, and outrageous attorney fees, among many others. These will be charged to a borrower's account in order to increase the amount of a payoff, thereby creating even more profits for a loan servicer during a foreclosure action.
• Failure to disclose fees during a Chapter 13 bankruptcy. Servicing companies seem to work even harder against homeowners once they file for bankruptcy. Fees can increase, but little justification for the fees will ever be given, even to the bankruptcy courts.
• Collection of junk fees even after discharge in Chapter 13. Because the company knows the homeowners no longer have the protection of the courts or the guidance of a bankruptcy lawyer, they can add the junk fees back in and charge them to the borrowers.
• Using junk and late fees to show negative payment history. This would help the mortgage servicer argue that the homeowners have failed to uphold the bankruptcy payment plan and that a relief from stay should be granted. The servicer can try and argue this even if the borrowers have made all of the required Chapter 13 payments on time.
• Attorneys for corrupt mortgage servicers just as corrupt. These attorneys will receive information they know to be inaccurate or misrepresented from the servicer and file motions in court like it was legitimate -- another case of lawyers abusing their positions in order to keep a rich client happy. But the lawyers also know that they can overcharge for legal and court fees and it will be charged to the borrowers' accounts. These fees may even be in excess of what courts have approved.
• Escrow account abuse. Servicers may create illegitimate escrow accounts to hide the fact that they are taking borrowers' money and applying it to junk fees, late fees, and interest, instead of on the actual amounts due on the loan. This pushes borrowers even further behind every month. Companies may also fail to fund escrow balances properly, creating negative balances when county property taxes or homeowners insurance are paid. The homeowners are then charged for this deficiency and fees and interest are added to the balance of the loan.
• Forced-place homeowners insurance. Too often, servicing companies will arbitrarily determine that the property insurance in place on a home is not sufficient, or they will simply deny there is any insurance present at all. At this point, the mortgage loan servicer will buy a policy from an insurance company it is affiliated with and charge the premiums to the borrowers. Unfortunately, the premium may be several thousand dollars more than the original policy was. But the servicer will adamantly, consistently deny that the homeowners' policy was adequate, and no amount of proof or phone calls will convince them otherwise.

Unfortunately, there are simply far too many ways that homeowners can be abused by servicing companies to list here. A surprising number of the largest names in mortgage servicing have been found engaging in these practices and have been forced to pay homeowners. A good attorney or foreclosure specialist trained in this area will be able to help the vast majority of borrowers determine if servicing abuse is a factor in their foreclosure.

Although there is no specific federal or state law outlining what constitutes mortgage servicing fraud or abuse, both areas of the law outline some prohibited actions for any mortgage lender or servicer. Regulation Z of the Truth in Lending Act is a good place to begin research, as well as any applicable state foreclosure laws, consumer protection laws, and banking regulations.

In terms of using this as a defense against a foreclosure lawsuit in court, homeowners may allege servicing abuse in the affirmative defenses or counterclaims portion of their answer to the complaint. Depending on the severity of the abuse, borrowers may be able to offset some of the damages they have suffered or have an entire defense to the lawsuit for especially egregious acts.

In a move which should be surprising to no one, the government is working on passing a new bill to give more power to previously-failed government programs and reward more financial institutions for engaging in fraudulent and predatory practices. The Helping Families Save their Homes Act of 2009 was passed by the House of Representatives this week and serves both of these purposes.

One of the main purposes of the bill is to loosen some of the strict requirements on homeowners and lenders to participate in the government's HOPE for Homeowners program. Since being instituted in 2008, the FHA-administered plan has been given close to $320 billion and has helped a single family facing foreclosure. This is so bad that even the government itself is disappointed with the results.

However, the bill also provides a safe harbor for mortgage servicing companies to protect them from liability. RealEstateRama reports that "The bill provides a safe harbor from liability to mortgage servicers issuers, trustees, loan sellers, depositors, and any other person to the extent the person’s cooperation is required to allow the servicer to engage in loan modifications, as long as the servicer provides a modification consistent with the Administration’s program or it utilizes Hope for Homeowners."

Mortgage servicing companies have been pushing undeserving homeowners into foreclosure for decades, and the documented complaints against such practices are nearly endless. But now, as long as these companies participate in a loan modification with government guarantees, they can be protected liability? It seems that such a provision will just encourage additional moral hazard on the part of servicers.

Many times, mortgage servicers have engaged in fraudulent actions designed to increase fees and interest for homeowners long before they fall behind on their mortgage. This raises the profits of the servicing company and the holders of the loan. Most of the time, these extra charges may go unnoticed forever, as homeowners sell or refinance and pay off the mortgage without examining how the final payoff was calculated.

But if a homeowner falls behind on their payments, sometimes as a result of actions such as placing forced insurance on a house unnecessarily, the servicer will immediately begin foreclosure as well as accelerate fees and interest charges even faster. It may be impossible for the owners of the property to prove to the company that the insurance is necessary or they are not even behind on payments -- the foreclosure continues anyway.

Even the threat of litigation has not stopped servicing companies from engaging in such frauds. After all, they have enough money to hire lawyers who can lie to judges anyway. Homeowners facing a financial hardship or living and working do not have the time or resources for such luxuries as taking advantage of the legal system to enrich themselves at the expense of others.

Mortgage servicing companies have always been reluctant to negotiate mortgage modification agreements with borrowers, as well. This is due to the fact that they make more money by not working with homeowners, rather than dedicating a portion of the servicing fees they receive to loss mitigation departments and staff. It is in the financial interests of the servicer to let the home go into foreclosure.

But now, with the passage of the Helping Families Save Their Homes Act, this may change. Servicing companies can still go ahead and fraudulently jack up fees or force insurance on a house and wait for the borrowers to fall behind. Once this happens, they can offer a loan modification in their interests -- not the homeowners' -- through the HOPE for Homeowners or other government program, and escape liability for the actions.

Where the report states a requirement that these modification programs meet guidelines "consistent with the Administration’s program or it utilizes Hope for Homeowners," it should be kept in mind that the government programs' redefault rate is over fifty percent. This means that the majority of people who get a government guaranteed modification end up back in foreclosure again within six months -- which is where the servicers want them anyway.

Many of the government's programs to help homeowners stop foreclosure seem to have good intentions on the surface, but each one also contains one provision or another that is a blatant handout to the banks and financial industry. This latest immunity from liability for servicing companies is just another example of how government actions are actually making the foreclosure crisis worse and encouraging banks and servicers to keep taking advantage of borrowers.

The number of federal laws ostensibly designed to protect homeowners and borrowers from predatory or discriminatory lending is mind boggling. With the dozens of laws in place that were supposed to protect people buying homes and regulate the financial industry, it must have been a huge surprise to politicians and regulators when the real estate bubble burst and foreclosure rates skyrocketed – after all, this is what all those regulations were guaranteed to protect against, right?

Many commentators, politicians, pseudo-economists, and other media proclaimed experts have pointed out only one (false) cause of the housing crisis – the lack of regulation on Wall Street, on subprime lenders, and others in the real estate industry. These same professionals who failed to foresee the collapse, though, can only recommend one solution – give more power to the government in the form of more regulations, more laws, and more bailout programs.

The following is a partial list of some of these laws and rules that were put into place specifically to regulate the financial or housing markets, as well as a large number enacted for other reasons but which have relevancy to the great housing market bubble:

• Community Reinvestment Act
• Department of Housing and Urban Development Act
• Equal Credit Opportunity Act
• Fair Credit Reporting Act
• Fair Debt Collection Practices Act
• Fair Housing Act
• Homeless Assistance Act
• Housing and Community Development Act
• Indian Housing Act
• National Housing Act
• Real Estate Settlement Procedures Act
• Truth In Lending Act
• Veterans' Disability Compensation and Housing Benefits Amendments

In fact, this is only a very small sampling of the Act of Congress that have been created to regulate the housing market, the financial industry, and mortgage lending in particular. And even banking acts and laws have been mostly kept out of the above short list, although they are designed to regulate the institutions that provide the most money for mortgages.

It is not lack of regulation of the housing market that caused the foreclosure rate to skyrocket and real estate prices around the country to plummet. The vast number of regulations on banks and lenders and mortgage brokers and appraisers and real estate agents and title companies were all supposed to prevent a crisis of the magnitude the country now faces from ever happening.

But it is not the regulations or laws or lack thereof that is the problem. The real problem is that banks and financial firms that want to take advantage of their clients face absolutely no consequences for fraudulent or predatory actions. This situation where banks own the government which rules over the rest of the people in the nation has come about through two main factors.

First, access to the courts for homeowners facing foreclosure has been severely restricted. In nonjudicial foreclosure states, homeowners do not even have the right to confront the bank and the charges against them – the lender is simply able to advertise a sheriff sale of a property, regardless of the borrowers' circumstances or if they have ever missed a payment. And it will cost them potentially thousands of dollars to file their own lawsuit against a bank to stop foreclosure, a price which many homeowners dealing with a financial hardship are unable to pay.

But even in states where homeowners must be sued in court by the lender, access is still severely restricted. Even discounting the prevalence of “rocket docket” jurisdictions holding 30 second foreclosure hearings and lawyers simply lying to judges in order to push through cases, all of the complicated procedural rules have been written to keep the average person from being able to comprehend how the court system works. And again, if the owners want a fair shot at defending their home, they most often have to hire an expensive lawyer of their own.

The banks, on the other hand, are easily able to afford high priced lawyers all over the country when pursuing foreclosure against customers. The banks and lawyers are the two groups which contribute the most to political campaigns, and it is no surprise that judges are often willing to overlook gross deficiencies in lawsuits against borrowers in order to proceed to auction and eviction more quickly.

Thus, the banks know that homeowners can not afford the protection of the thousands of pages of laws that are supposed to protect them. How will another few thousand pages of lending laws and regulations make sure a crisis in the housing market never happens again, if borrowers are still unable to understand the law on their own or afford to hire someone who does understand?

Second, the banks know that they will never face serious repercussions for their fraudulent lending auctions because they have been given bailout after bailout time after time for decades. Every time there is a slowdown in the economy, the Federal Reserve lowers interest rates and the politicians borrow or print more money out of thin air to “stimulate the economy.” In practice, this always means handing out more money to the banks to create even more debt out of thin air.

Thousands of laws have not discouraged predatory lenders from creating money out of nothing, pumping real estate markets full of cheap money, and then dumping the worthless investments made from these mortgages onto markets around the world. The most meaningful responses by government to these acts have been decreasing the time homeowners have to defend against foreclosure and stealing trillions of dollars from workers and consumers to hand over to banks.

One of the great misconceptions about the foreclosure crisis, collapse of the banking industry, and resulting economic depression has been that there was just too little regulation of the mortgage and financial sectors of the economy. Unfortunately, the exact opposite has tended to be the case, with so many laws, rules, and regulations that it would be almost humanly impossible for any company or individual to know them well enough to be able to follow them.

In fact, the vast number of federal laws designed to regulate the housing market and consumer lending industry have served to lull home buyers and owners into a false sense of security, rather than provide effective controls over the economy. While some regulations were meant to restrict lending to those who could not afford to pay back their loans, other actions taken by legislators and regulators have directly encouraged such lending.

Thus, homeowners now facing foreclosure who put trust in the federal regulatory structure to help them save their homes may discover that these agencies participated in the housing boom by encouraging artificial price increases. Now with the collapse of the bubble and accompanying declines in home values, these same bureaucracies are being given hundreds of billions of dollars to assist homeowners in solving a problem they originally helped create.

The following is a list of just some of the federal or semi-federal organizations or regulatory bodies that had relevancy to the housing market, all of which failed to see the bubble, predict the collapse, or deal effectively with the fallout from rising foreclosure rates:

• Conference of State Bank Supervisors
• Federal Financial Institutions Examination Council
• Federal Reserve Board and Federal Reserve System
• Federal Housing Administration
• Department of Housing and Urban Development
• Fannie Mae
• Ginnie Mae
• Freddie Mac
• Office of Federal Housing Enterprise Oversight
• Fair Housing and Equal Opportunity Office
• United States Treasury Financial Crimes Enforcement Network
• Federal Trade Commission
• Office of the Comptroller of the Currency
• Office of Thrift Supervision
• National Credit Union Administration
• Department of Agriculture
• Veterens Administration
• Department of the Treasury

And these are only the regulators that had relevancy to the housing market. Other agencies such as the Securities and Exchange Commission had more oversight over the financial investment firms, hedge funds, and banking giants. These were the companies that did so much to inflate the bubble and spread the risk of the collapse to overseas markets and throughout the entire American economy. Semi-private companies like the credit ratings agencies are also absent from the above list.

Could any more regulation possibly have stopped the banks from wrecking havoc over the entire economy? There have been armies of federal bureaucrats sitting in offices throughout the country who were taking taxpayer money in exchange for overseeing the housing market and financial sector of the economy. Instead of providing effective regulation, they fostered the false sense of security so many homeowners and investors mistakenly bought into.

The above list also does not include the various state and local agencies that are spread around the nation and which employ even more bureaucrats supposedly making sure artificial housing bubbles, predatory loans, and out of control foreclosure rates never happen in their jurisdictions. Have all of them also failed in their public service duties for which the state forcibly takes money from the same homeowners and consumers allegedly for protection?

Hundreds, if not thousands, of regulatory bodies throughout the United States were charged with making certain that the housing bubble and collapse never happen. All of them have failed, despite the vast sums of money they are able to appropriate (or print out of thin air, in the case of the Fed). And now homeowners are expected to give these same agencies even more of their money to protect against more damage being done to the economy?

Homeowners dealing with the threat of foreclosure should know about as many options as possible, if they are attempting to save their homes before time runs out. Some of these options fall under the category of "loss mitigation," which usually refers to a third party (usually either another company or a division of the bank) that helps negotiate with borrowers to find solutions to foreclosure.

But under this category of loss mitigation fall a number of alternatives to foreclosure that may apply in various circumstances. Some lenders may not offer each of these solutions right from the start of negotiations, but homeowners can always request more information about them if they believe one may be appropriate for their foreclosure situation. The seven solutions detailed below are typically classified as loss mitigation.

Cash for keys. In a cash for keys negotiation, homeowners are offered a set amount of money from their bank to move out. The offer is usually presented by mail or in person through a local third party, such as a real estate agent or law firm. Banks offer such solutions in order to negotiate a peaceful transfer of a foreclosed home and give the former owners some cash in their pockets for moving expenses.

Deed in lieu. A deed in lieu of foreclosure can be offered to the lender by homeowners who are just trying to unload the house, avoid foreclosure, and move out. Borrowers offer to give the deed to the property back to the bank in exchange for the mortgage company not going through with the foreclosure process. At that point, the bank would be able to list the house for sale and attempt to recoup some of its losses.

Loan modification. Much press has given to the idea of modifying mortgages that are in foreclosure. There are a vast number of ways to do this, from lowering the interest rate to extending the repayment period of the mortgage. The only real drawback to this solution is that banks are rarely that enthusiastic about modifications, because a properly structured one will benefit homeowners more than lenders.

Partial claim. For homeowners with a mortgage guaranteed by the FHA, a partial claim may be used to give the bank a one-time payment from the government in order to stop foreclosure. In exchange, a lien is placed on the property, although the lien has a zero percent interest rate and does not have to be paid back until the first mortgage is paid off or the home is sold or ownership is otherwise transferred.

Short sale. A short sale allows borrowers to sell their property for less than the total amount that they owe to the lender. All of the mortgage companies have to accept a lower payoff for the sale to go through, or the homeowners will have to bring cash to closing to pay off any remaining liens. While this can help borrowers avoid losing their homes, banks are not very quick to approve short sales.

Short refinance. With this solution, the bank agrees to lower the total due on the mortgage in order to facilitate a refinance through another lender. Oftentimes, homeowners may be approved for a certain amount of money to refinance, but the amount they owe on the first mortgage along with fees and unpaid interest makes it impossible. A short refinance allows the refinance to go forward and the foreclosure to be avoided.

Special forbearance plan. Under a special forbearance, homeowners can make a lower payment or have no payment at all for a certain period of time. This can be more easily negotiated well before homeowners fall behind, as banks will not be fond of borrowers who ask for lower payments after they have begun missing them. In addition, the homeowners will eventually need to pay back any payments they missed.

Homeowners facing foreclosure have the problem of not knowing what options may be appropriate for their individual situations. And unfortunately, the lenders are often no help, pushing borrowers into expensive repayment plans or filing fraudulent lawsuits alleging foreclosure. However, the more that they know about various solutions that will help them save their homes, the less stressful the situation will be.

The number of potential violations of law, court procedures, and common human decency that the owners, managers, and employees of collection agencies have been caught engaging in is almost endless. Homeowners facing foreclosure, consumers considering bankruptcy, and even families attempting to pay back loans but who have fallen on hard times should be aware of these tactics in order to recognize them as the violations they are.

A previous article discussed some of these shady practices, including violations of the federal collection laws, seizing bank accounts holding exempt Social Security payments, obtaining judgments fraudulently by failing to serve borrowers with lawsuit paperwork, and others. In general, if a collection agency is involved in pursuing a debt, the main objective will be embarrassing borrowers, not making sure the debt is paid.

Even in the cases of identity theft, collection agencies will keep pursuing a debt once it has been established that the debt is exempt. Instead of giving up on such collection attempts, the account is usually just sold to another debt collector who begin the process all over again. If the borrower sends documentation that the debt is noncollectable due to identity theft, it is just sold to the next agency.

Debt collectors will also take advantage of the fact that most debtors do not know that they can request no more phone calls be made to their work, home, or other phone numbers. Instead, the agency will threaten to keep calling until the borrower is thoroughly embarrassed or has lost his or her job due to the harassment. Although this is against the law, collection agencies know that most borrowers are not aware of their rights.

Collection agencies know two things: they often can not validate a debt, and borrowers do not know how to defend themselves in court. Thus, when a collector is sent request for validation, it often responds by filing a lawsuit against borrowers. However, this is against the law, as a collection agency that can not validate a debt is no longer allowed to pursue any collection attempts until it has the information to validate properly.

The worst action that borrowers may take is agreeing to pay back a debt, in some instances. Collection agencies, once authorized to debit a bank account for periodic payment, will attempt to withdraw as much money as possible from the debtor's account over a very short period of time. This can result in NSF fees, overdrawn account fees, and the closure of the bank account in the end.

In some states, debt collectors are able to dictate to the banks what to do with borrowers' money even without a judgment, court order, or lawsuit. So-called "pocket service" laws state that a bank can be served with a garnishment summons and the bank account must be frozen for the payment of the debt. Again, exempt Social Security payments may be in the account, but borrowers must fight to get those funds back.

It should be noted repeatedly by homeowners and consumers that collection agencies file a large number of lawsuits, regardless of the statute of limitations, identity theft, or being able to find and serve the debtor properly. In almost all of these cases, the collectors use lawyers to file frivolous, fraudulent lawsuits and obtain default judgments, even for debts that are otherwise noncollectable.

Veterans are not protected, either, from the deceptions of collection agencies. A report by the National Consumer Law Center has this (PDF) to say:

My client, a soldier in Iraq, gives [Debt Collector] permission to debit his account for $300 on 5/1. They proceed to clean out his account. He called [his bank] and asked that [Debt Collector] be blocked from any further access to the account. [The Bank] tells him that is not enough; that [Debt Collector] is well known to them, and they will simply take further monies under a different name--they do this to soldiers all the time.

Debt collectors usually are not picky about which groups they harass -- everyone is an equal opportunity victim. But obviously, some companies decide to enter niche markets, like taking advantage of veterans based overseas who find it more difficult to defend against such actions.

Thus, every homeowner should be on guard against the fraudulent practices of debt collection companies attempting to embarrass debtors more than have debts repaid. Many of these parasites masquerade as law firms, using their political connections to sue borrowers even when all of the actions they must perform to get a judgment are based on lies and against the law.

Of course, this is not to say that every borrower is being preyed upon or every debt collector is a predator. However, a surprising number of collection agencies have established a pattern of behaving in a manner designed to humiliate borrowers instead of give them opportunities to repay defaulted debts. By gaining an awareness of such practices, hopefully more debtors will be able to avoid being taken advantage of by fraudulent companies and lawyers.

It should come as no surprise that the vast majority of people who fall behind on debt payments do so for financial hardship reasons -- not because they are simply deadbeats. Despite, this, however debt collection agencies often take steps to inflict the maximum amount of anxiety, fear, and embarrassment on borrowers who fall behind on loans, going so far as harassment and engaging in other illegal acts.

This article will describe some of the harassing actions that collection agencies take when pursuing debts. Although these companies have the right to purchase defaulted accounts and attempt to collect on them, they often engage in activities that serve little other purpose than humiliating borrowers; the collection of the debt seems to become a secondary objective to creating embarrassment and humiliation.

The first practice that debt collectors routinely engage in is pursuing debts that they know they can not validate properly, according to the Fair Debt Collection Practices Act (FDCPA). Despite not having the proper documentation, the companies keep trying to collect and go so far as to initiate lawsuits against borrowers for debts that the agency knows it can not prove it has a right to collect.

This is one reason so many collection agencies are law firms -- they can throw the entire issue into court, relying on the incomprehensibility of the legal system to the average person. The debt collectors take refuge in the confusing language of the law and the protection and violence of the state in order to pursue borrowers. This way, they can threaten judgments, wage garnishments, and even jail time.

Another shady practice that collection agencies engage in is having courts seize bank accounts that are used as direct deposit accounts for Social Security payments. Social Security payments are meant to be exempt from collection attempts, but the small issue of obeying the law does not stop debt collectors from going after such accounts. The law and the courts, it should be remembered, are only meant to protect lawyers.

Debt collectors will also routinely deny ever having received a payment from someone who is trying to make a payment on an overdue account. Acknowledging receipt of the payment would cause the collection agency to stop the fun of humiliating and embarrassing borrowers, which is, after all, the main purpose in the first place. Unfortunately, even sending proof that the payment was received and cashed can do little good.

The ways that collection agencies take advantage of the court system are nearly endless. The easiest way to get a fraudulent judgment against a debtor, of course, is to send the lawsuit paperwork to the wrong address. If the borrowers never receive the documents, they can not make a defense, and the collection agency gets a default judgment, which may be difficult to overturn later on.

Some collection agencies are aware of debtors' rights under the FDCPA, but routinely ignore them, instead moving further and further down the road of harassment and threats of lawsuits. If a company can not validate a debt, it must cease collection. However, few debt collectors follow this, instead refusing requests for validation and continuing with attempts to collect and then suing the borrowers.

All states have a statute of limitations during which a debt can be collected. Collection agencies are aware of these statutes, but are just as aware the borrowers do not know about them. They take advantage of this to pursue debts that may be years or decades old, and which can no longer be pursued. They engage in the same harassing practices to get people to pay debts that they do not even owe any longer.

It should be clear to any borrower that debt collectors, from mortgage lenders to collection agencies for personal loans and credit cards, routinely take advantage of widespread public ignorance of lending and collection laws. They do this in order to take advantage of hardworking people who ran into a financial hardship, while the collectors themselves provide almost no redeeming qualities to the productive society.

The worst part may be that all of the money that people borrow from banks is created by the lender out of thin air, based on little more than the signature of the debtors. The creditors provide absolutely no services, loan out devalued money, create only enough for the principal amount to be paid back but not the interest, and then pursue borrowers to or beyond the grave in order to collect.

In the end, all attempts to collect a debt represent attempts by parasites to attach themselves to a productive member of society who is simply unaware of the nature of the legal and financial system. With all of the fraud and deception in these systems, is it really any wonder that many more borrowers are beginning to reduce their reliance on debt and starting to save money again?

Banks, judges, and lawyers typically all work together to get through as many foreclosure cases a day as they can. After all, the judges get more filing fees for their court by handling a larger caseload, and lawyers can bill all the hours they want to a bank that can create money out of thin air. But even in such a scheme as this, the judges that may want to evaluate a foreclosure case on its merits have to deal with deceptive lawyers.

The Herald Tribune in Florida, the same state in which some judges are going through 800 foreclosure cases a day, giving homeowners less than thirty seconds to defend their homes, reports that, "A Sarasota attorney, Richard Kessler, enlisted a few friends to go through 180 foreclosure cases in Sarasota County looking for errors. They found three out of four cases proceeded with incomplete or improper documentation."

So seventy-five percent of foreclosure lawsuits that banks initiate are based on wrong documentation. But too few homeowners even appear in court to defend their homes, and the ones do show up to a foreclosure hearing do not know enough about the law and their rights during foreclosure to mount a proper defense. Without pointing out the bank's lawyers' mistakes in just the right way, it would not matter anyway, with all of the procedural rules in courts.

The main finding in the study the report refers to is that few banks can prove that they actually own a mortgage that they are suing for foreclosure. The report states the following disturbing findings:

For instance, the survey found that only one in 12 cases had the documents to prove the company foreclosing on the property was also the company holding the mortgage note.

In half of the cases reviewed, the plaintiff said the mortgage note had been lost.

But simply not being able to prove that it has the right to collect on a loan does not stop the banks from filing lawsuits anyway. And the threat of a lawsuit, any kind of lawsuit, is typically enough to scare most borrowers into abandoning the home and moving out before eviction.

Another lie that the banks have their attorneys participate in is undermining court-ordered mediation services. When courts mandate that homeowners and lenders meet to discuss alternatives to foreclosure, the lawyers are just stating that the borrowers "had 'no interest in the program or declined,'" whether or not that is actually true. And it is often not true, despite the bank's attempts at deception.

The news story details a long list of practices that mortgage companies and lawyers representing those companies engage in to deceive judges and foreclosure homeowners into unlawful foreclosures. The list proves again that the courts are simply set up as formalities to "give people their day in court," while sabotaging any effort they may make in an actual defense of their home. A number of such legal frauds are listed below:

• Judges simply take foreclosure attorneys' at their word that all of the paperwork is in order and sign off on judgments and orders for sheriff sale or eviction.
• Bank lawyers file foreclosure lawsuits involving properties in other counties that the courts have no jurisdiction over, thereby taking advantage of a large caseload to get these fraudulent foreclosure through an overworked system.
• Lawyers file lawsuits on behalf of banks without documented proof the lender owns the mortgage or has the legal right to collect on it. In many cases, the bank simply says the note has been lost but still wants to go through with the foreclosure lawsuit. Judges comply.
• Lenders ignore county rules mandating they meet with borrowers to discuss solutions to foreclosure outside of the court system. Even if homeowners want to participate in negotiations, lawyers file paperwork stating the owners had no interest. No negotiations are ever held.
• Lawyers claiming that banks, in order to have the legal grounds to file a lawsuit against homeowners, have changed their names to the company that is shown as owning the loan, even if this is not the case at all.
• Banks offer to negotiate with borrowers and put the foreclosure process on hold during negotiations -- but file the lawsuit anyway and obtain judgments and orders against the homeowners, who were led to believe there would be no legal action.

The only really surprising aspect of the entire news article is that the Herald Tribune seems to believe that these lies are "a new tool in foreclosure." Unfortunately, these and similar fraudulent practices have been going on for years now, long before the housing boom turned into a bubble and then collapsed. The only difference now is that, with more and more homeowners in foreclosure, there is more lying being done.

These and other practices are just one more reason that homeowners in foreclosure should consider hiring their own foreclosure attorney or personal bankruptcy lawyer to help them examine various legal options they may have. If 75% of foreclosure cases have serious errors that the bank covers up through fraud and deception, then more borrowers may be able to save their homes or live mortgage-free for years just by spending the money to hire a good attorney to help them.

Although banks love the lawyers whose services they can buy, either as government legislators, regulators, or law firms who will lie to courts about foreclosure cases, these same lenders rarely enjoy talking to the legal representative of a homeowner. Although this seems a bit contradictory, it makes sense from the perspective of predatory banks with a lot of money that employ lawyers to justify their scams.

Homeowners facing foreclosure typically employ their own attorneys in two separate instances. The first is when borrowers attempt to defend against a foreclosure action in court by hiring a lawyer to represent or help them through the lawsuit. The second is, if there are no other options left to save the house, the homeowners decide to file for bankruptcy and hire an attorney to help them with this.

In either case, the banks do whatever they can to discourage the homeowners from seeking out legal counsel and fighting for a realistic solution to keep their properties out of foreclosure. Lenders would much rather let a house go into foreclosure and take it back quickly, knowing they can rely on government bailouts and Federal Reserve counterfeiting to keep them in business without having to help clients.

But especially in the case of defending a home in court, homeowners may be able to turn the tables on the mortgage companies. Simply by threatening to defend the lawsuit, homeowners may be able to convince the banks to begin negotiating for a more beneficial mortgage modification or other solution that will work out for the borrowers (and the banks) in the long term.

The are a number of benefits that homeowners receive by seeking out legal representation during foreclosure. First, a lawyer who is familiar with lending laws can usually find various laws or regulations the bank may have violated in the origination or servicing of the loan. Raising these issues in court during foreclosure lawsuit can severely derail the process and drag out the foreclosure for years.

Banks are willing to do almost anything to avoid having the foreclosure last for years, as this is all time that the home is under litigation, it is costing the bank in legal fees, and they are not collecting payments on the loan. In fact, this tactic can be one way for homeowners and their own lawyers to persuade the bank to offer a mortgage modification rather than going through with the foreclosure.

In terms of filing for bankruptcy, changes to the bankruptcy code in 2005 made it more time-consuming and paperwork-intensive for borrowers to discharge or reorganize their debts. Although it is still very possible for homeowners to file on their own, they may wish to hire a bankruptcy lawyer to help them with the process.

Lenders, of course, like bankruptcy just as much as they like homeowners who are defending their homes in court. Although these same lenders rely on homeowners and taxpayers to keep the entire banking system itself out of bankruptcy, they do not like when homeowners file to avoid foreclosure. Most times, they will do whatever they can, including outright lying through their own attorneys, to have the case dismissed.

This is not to say, though, that filing for bankruptcy is a great solution for homeowners facing foreclosure. In many cases, the reorganization plan under a Chapter 13 can be very expensive and will lead the borrowers right back into foreclosure once they miss a payment. Although banks know that bankruptcy will most likely fail within a few months, they still try to get the case dismissed and go right back to foreclosure.

It seems more than a little ironic that, given the banking industry's love affair with the law industry, banks would be so loathe to work with attorneys hired by homeowners in foreclosure. Obviously, the lenders believe that the law should be too expensive for the common person and instead defined and decided by those who own the lawyers, courts, and legislators; i.e., the banks themselves.

When homeowners on their own negotiate with a lender for a loan modification to avoid foreclosure, the owners typically end up with a repayment plan instead of a modification. The differences between the two plans, however, could not be more drastic, and homeowners rarely benefit from a repayment plan as they would under a more specialized mortgage modification agreement.

The main aspect of a repayment plan is both a benefit for banks in the short term and a huge drawback for homeowners. Essentially, this solution to foreclosure allows homeowners to pay back the amount they have fallen behind in monthly payments over a period of time (for example, six months), while still keeping on top of the current payment. The terms of the loan are not modified at all, but the foreclosure process is halted.

While some homeowners who have recovered from a financial hardship and actually ended up with a higher income in the end will be able to afford such a repayment plan, most borrowers make a few payments and go back into default. Because the terms of the mortgage remain the same, and the original monthly payment is unchanged, homeowners have to pay more each month under a repayment plan than they were paying before.

Once homeowners fall behind on the bank's plan, the foreclosure procedures start up again and the borrowers are left to face the situation with one fewer option, more late fees and legal expenses charged to their account, and a lender unwilling to offer them any other solutions. Banks, once a borrower has failed to make their regular payments and then failed at a repayment plan, typically offer little else to help stop foreclosure.

While a properly done mortgage modification could help a large number of homeowners facing foreclosure, for some reason, banks shoot themselves in the foot over and over again by offering repayment plans. These plans are typically too expensive for the family and they end up right back in foreclosure after just a couple of months. In fact, some homeowners are only able to make one payment before falling behind again.

Why lenders offer these solutions instead of providing real assistance to borrowers, though, should be obvious for anyone following the news. There are two main reasons that banks do as much as they can to avoid modifying loans, and why they only offer repayment plans or bad loan modifications if they offer any options at all to their clients. They both have to do with the solvency of the banking industry.

First, if banks modified a loan, it would make the loan less profitable. A loan at 9% interest looks a lot more inviting to a potential investor than a loan at 3% interest. If banks were marking down mortgages to their current market levels, they would have to recognize far greater losses in the short run. So they have adopted a policy of offering repayment plans to borrowers in order to keep losses off the books for an extra couple months.

Second, banks are using repayment plans and the failure of their typical modification programs as political cover. Every time they offer a plan to avoid foreclosure to a family who can not afford it, banks receive two benefits. The lenders are able to tell politicians and the media they are offering plans to borrowers, and they are able to show the failure of these programs when begging for more bailout money. Heads, the bank wins; tails, the taxpayers and homeowners lose.

Too often, banks offer their shoddiest, most expensive repayment plans to homeowners who are negotiating on their own behalf for a solution to foreclosure and who will take any option they can get to avoid a sheriff sale or eviction. But in too many cases, the end result is the same -- the plan is impossible, the homeowners fall behind, the foreclosure starts again, and now there are even fewer options to save the home.

This weekend on the radio, there was an interesting discussion among a handful of financial and mortgage experts about the banking industry's current fascination with loan modification programs. The participants in the discussion came up with some very good points about the modifications that lenders are currently offering to homeowners in foreclosure trying to lower their monthly bills and how banks use lawyers to pursue foreclosure but do not want to deal with a homeowner's legal representation.

First of all, the banks are beginning to get into the loan modification game because of simple survival concerns. On a mortgage with a high interest rate, they may initiate negotiations with borrowers to lower the rate from, for example, 8% to 5%. Most borrowers who are behind in payments and facing a financial hardship may view this as an exceedingly good deal and not hesitate to take it.

However, the banks' willingness to begin modifying some mortgages is based only on short-term survival concerns. Lowering the rate by only a couple of percentage points is just not helping many homeowners. Within six months of a loan modification, borrowers are falling behind again and may even end up right back in foreclosure.

This gives the financial industry all the ammunition it needs when it goes before the United States Congress, states it has been attempting to help homeowners, the modifications are just not working as borrowers fall behind again, and it would be great if the Congress could just give the banks a few billion dollars more to see them through the economic depression.

The lawyers in Congress, of course, acquiesce to the banks' demands, hand them over several billion more dollars of money taken from taxpayers -- the very people the banks are supposed to be modifying loans for -- and send the lenders back to the foreclosure drawing board. The lenders, in turn, go right back to making bad modifications and then sending their lawyers in once the homeowners redefault.

This is one more reason why banks love their own purchased lawyers but simply hate dealing with a lawyer who has the morals and ethics to help borrowers in financial distress. Some banks are now even recommending that borrowers do not get legal representation when attempting to work out a solution to foreclosure.

Banks are pushing this line on homeowners for the same reason they originally pushed subrpime, stated income, and no documentation mortgages -- it works out for the banks over the long term but hurts borrowers. Originally, the foreclosure process used to have just a couple of steps:

• Homeowners fall behind on payments.
• Foreclosure process begins.

Now, bowing to political pressure, banks have added another step, although the end result is the same:

• Homeowners fall behind on payments.
• Banks offer inadequate mortgage modification.
• Homeowners fall behind on modification.
• Foreclosure process begins.

By offering the bad loan modification deal to borrowers, banks can claim political cover later on when the plan fails. Homeowners are not aware of their rights during foreclosure, so therefore fall for the bank's offer of a reduced interest rate, even though they know they will not be able to make the payments for the long term.

The lenders have always counted on the inability of borrowers to understand the complicated mortgage documents they sign to purchase their home. Banks themselves do not understand the documents, but they know that they can create enough money out of thin air to purchase lawyers and judges who will interpret the loan paperwork in the interests of the mortgage companies.

In conclusion, banks are beginning to offer loan modifications they know will later default for two primary reasons. First, it gives them political cover when they ask for more bailouts from Congress later on. And second, offering a modification preempts the homeowners' search for a company or lawyer who can help them negotiate a much better deal or determine what lending laws the bank has violated. But this almost always ends up as a good deal for banks and a horrible one for borrowers.

Banks love lawyers. In fact, they love them so much that, after lawyers themselves, the financial industry ranks highest in the amount of contributions made to political campaigns. This ensures that the lawyers the bank purchases through campaign contributions will work hard to keep the banks in business, allow them to operate with impunity, and bail them out in case disaster strikes.

At the federal, state, and local levels, banks and lawyers work together to create laws and enforce them upon the rest of the country, state, or community to enrich themselves, impoverish others, and keep their various frauds going as long as possible. Manipulating interest rates, engaging in fraudulent lending transactions, creating money out of thin air, and keeping borrowers from adequate legal representation are just a few of these deceptions.

Banks hire their lawyers and install them in legislatures at every level of government in order to control the "secret" language of contracts and property rights among the people. Local courts, which are made up of judges picked by lawyers who themselves were picked and funded by the banks, then typically interpret every law and contract in the banks' interests and avoid looking behind the curtain of fractional reserves and where banks actually get the money that they loan out.

As well, many lawyers, being so close to the other lawyers in state legislatures, pledge an oath to the state itself to become lawyers in the first place. By spending the requisite time taking state-approved university law courses and pledging loyalty to the state, they are then able to help private citizens defend their rights in state courts against bad laws written by more state lawyers.

In the end, laws are nothing more than opinions backed by guns, written by lawyers in confusing language specifically to keep the average person from understanding them. Typically, the government is seen as the chief lawmaker, issuing opinions, enforcing them by coercion, and imprisoning or killing people who do not comply with them. Government as an institution claims this monopoly over the use of force.

But with the current economic crisis, the real operators of the government's monopoly on obedience through force have been revealed as the banking industry. The banks bought their lawyers, installed them in legislatures, had laws and policies and regulations written in their favor, and then took full advantage of these opportunities to ruin the housing market.

As soon as the financial institutions began experiencing losses due to the bad loans they had made to homeowners, they essentially took the government hostage and demanded hundreds of billions of dollars as protection money for "systemic risk." Financial industry representatives at the Federal Reserve and Treasury Department were sent to Congress by the banks to blackmail them into various thefts of taxpayer money.

The lawyers in Congress, not wanting to let go of their second-largest campaign contributors, agreed to hand over hundreds of billions of dollars to the banks directly, and have allowed the Federal Reserve (not controlled by Congress at all) to fund several trillion dollars more of new programs designed to bail out the financial system. The American people have been sacrificed for the state lawyers and state bankers.

And the sacrifices continue. Every month that goes on with banks receiving more money and the government continuing to grow, unemployment will stay high and keep going up. Not having a job is the price people have to pay to keep the banks in charge of the government and the state lawyers retaining any legitimacy whatsoever. But the banks love the lawyers who they purchase to enforce their opinions and frauds through force, and the state lawyers love the ill-gotten gains the banks funnel back to them through campaign contributions.

This is the reason why homeowners facing foreclosure may either want to find someone with knowledge of the law but who is not owned by the banks, or simply do the work of saving their homes on their own. But simply hoping that the state courts will provide justice is a mistake. Too often, the "little guy" is forgotten about while the banks, state lawyers, and state judges determine how best to carve up the fraudulently stolen property.

Hopefully, with all of the negative press about banks, lenders, and credit card companies who gave out loans to borrowers who could not pay them back, raised fees without notice, and then came to the government for bailouts, consumers have begun to wise up to the credit trap. But for those who still have a desire for credit after bankruptcy, or foreclosure, some guidelines should be followed for wise credit use.

Borrowers should start with their personal bankruptcy lawyer when attempting to get their financial lives back on track. Many of these attorneys have witnessed the destruction creditors can create in consumers' lives through complicated contracts, interest rate changes, and fraudulent expenses added to a loan balance. But there are also numerous other tips for using credit wisely if it must be used at all.

First, consumers who have experienced a dramatic hit to their credit scores due to bankruptcy or foreclosure may want to wait before applying for any new loans. There is really no rush to get another credit card or car loan, especially if filing bankruptcy only eliminated the large debt load but did not address the financial situation or hardship that led to default in the first place. In this case, waiting may be the best option.

Second, just because a borrower may qualify for a high limit credit card, personal loan, or mortgage does not mean that it is a good idea to take out as much money as they can. Homeowners who did this over the past decade are now likely to be underwater, owing more on their home and other loans than their assets will ever be worth. And they have little to show for all this debt load.

Instead, borrowers should come up with a reasonable financial plan and view taking out a loan as temporary financial slavery, rather than winning the lottery. Many consumers saw a $10,000 credit card limit as the path to success, but are now realizing that they have indebted themselves at high rates of interest possibly for decades to come. A high credit limit is more a trap than it is a benefit.

Third, if there is not really any reason to borrow again after bankruptcy or foreclosure, then there is also no reason to apply for credit lines "just to have them" or "in case of emergency." Consumers who rely on borrowed money in the event of an emergency just make it more likely they will have to take on more debt the next time a situation comes up requiring quick cash.

In fact, once homeowners have resolved their foreclosure or a bankruptcy case has been dismissed, the next step after financial recovery should be setting up an emergency fund. Rather than borrowing money at 29% interest, it would be a far better idea to tap into a savings fund, if one is available. And even if the savings does not cover the emergency completely, it can reduce the reliance on credit.

A final tip is for borrowers to read all of the contracts and disclosures they receive when applying for credit. If they do not understand the terms in the documents, they should take them to a contract or lending law attorney who can help explain them. If the attorney can not adequately explain them, then it may be best to stay away. Creditors with complicated payment and interest clauses can easily take advantage of consumers.

The most important change consumers can make after surviving foreclosure or bankruptcy may be to begin viewing taking out loans as voluntary slavery to a creditor. Banks have advertised loans as free money with low interest rates, but this is not how they behave at the moment a payment is late. Then real money lender comes out, suing borrowers, refusing homeowners' calls, humiliating them, and stealing their money through bailouts.

With the economic depression, government takeover of the banking and auto industries, and a failure to fix the foreclosure rate in America, homeowners are becoming increasingly desperate for options to save their homes. And unfortunately, the most common options to keep a house and get it out of foreclosure are quickly becoming difficult to impossible to achieve.

This is why homeowners should work on the conventional alternatives to foreclosure, such as mortgage modification, foreclosure refinancing, and selling the home, but should also have a few backup plans ready to go "just in case." A few of these last resorts include filing bankruptcy, selling at a short sale, and offering the bank a deed in lieu of foreclosure, and each of these options have both benefits and drawbacks.

Bankruptcy has a number of good aspects to it that homeowners can utilize in a foreclosure action. Filing can stop a sheriff sale immediately, even if it is just a few hours before the auction time. Bankruptcy will also put a stop to collection activities (including any foreclosure lawsuit) once the automatic stay goes into effect. As well, just by filing, homeowners will delay foreclosure and get more time to work out other solutions.

Unfortunately, though, there are serious drawbacks to option that should encourage homeowners to consult a personal bankruptcy lawyer to determine if it is right for them. Bankruptcy will destroy a borrower's credit. And if the payment plan under the Chapter 13 is too expensive, it may prove to be only a short term solution. Lenders will try to get the case dismissed at every opportunity, making it an ongoing fight for homeowners.

Selling the property at a short sale is another option to stop foreclosure and unload a property. Homeowners can sell and the legal process will be stopped completely. Even with a declining real estate market, they will be able to sell for less than total owed on the mortgage. Also, by negotiating the terms of the short sale with the lender, borrowers can avoid any possibility of a deficiency judgment.

On the negative side, though, short sales can be problematic. There are possible income tax ramifications (although these have been lessened). The biggest sticking point is just that lenders may not approve a short sale even if it is in their best interests to do so, and it takes time to get the deal completed even if the mortgage company is willing to allow homeowners to use a short sale to avoid losing their house to foreclosure.

Offering the bank a deed in lieu of foreclosure can be a last resort if the owners are unable to sell or refinance or work out any other solution. This alternative avoids the house being sold at a public foreclosure auction, as well. And similar to a short sale, borrowers would be able to negotiate away any potential liability for deficiency judgments. A deed in lieu can cut short the foreclosure process, as well, if the lender accepts it soon enough.

The main drawback of a deed in lieu of foreclosure is simply that the lender still has to approve it before it can go through. And mortgage companies are not often willing to accept one unless it is clearly in their interests, which may be rare. Furthermore, the impact of a deed in lieu can be almost as damaging to homeowners' credit scores as having a full foreclosure and numerous missed mortgage payments.

The main objective for most homeowners facing foreclosure is just to save their home and get back on track with their financial lives, if possible. If not, selling and walking away with a little bit of money is a good second choice. But life does not always work out the way we want, so it is always a good idea for borrowers to have at least one backup plan if they are unable to work out a more beneficial solution to foreclosure.

When homeowners first begin to experience trouble paying their mortgage, in order to avoid foreclosure, they typically turn to one of three common options. These three alternatives that can save a home include refinancing through a foreclosure or hard money lender, requesting help from the government programs, and asking the mortgage company to negotiate a loan modification.

With any plan to save a home from foreclosure, there will be both positive and negative aspects of the solution. Whether any of these options will actually help a family for the long term or just prolong the inevitable is always dependent on the unique circumstances of each financial hardship. However, homeowners can know where to focus their efforts by learning more about each solution.

Foreclosure refinancing through a traditional lender or hard money lender can be accomplished fairly quickly. If the conditions are right, a loan to stop foreclosure can be approved within a matter of days, and all of the due diligence (income verification, appraisal, and so on) can be accomplished within weeks. Hard money lenders can act even more quickly than traditional banks and foreclosure lenders.

However, it can be very difficult for the average homeowner to qualify for a foreclosure loan in the first place. This is due to strict income and equity requirements, and homes that have dramatically declined in value from peak levels may not have enough equity. In order to move ahead with the refinance, the homeowners would have to negotiate with their lender for a reduced payoff or bring cash to closing.

With all of the new government plans in place, many homeowners may attempt to cash in on the subsidies. There has been a vast amount of money made available for government-guaranteed loans to foreclosure victims, as well as programs providing assistance in working with the government to negotiate a loan modification. In some instances, these programs may be beneficial for borrowers.

Unfortunately, though, many of the government programs have been plagued by failure, high redefault rates, and wasted money. The $320 billion program to help one borrower is just the most egregious example of this. The new plans are also primarily voluntary for the banks to participate in, and the vast majority of lenders have been choosing foreclosure over assisting homeowners through the government programs.

Loan modification has also been discussed more and more by politicians, the news media, and foreclosure assistance companies, and for good reason. A mortgage modification can help lower the monthly payment, put the defaulted amount on the end of the loan, or reduce the interest rate on a loan. Homeowners who can qualify for a good modification are often in a much better position to keep paying their mortgage for the long term.

The problem, though, is that most lenders offer a much more expensive repayment plan instead of a loan modification. With a repayment plan, the interest rate remains the same and borrowers have to make their regular payment plus a portion of what they are behind. This can quickly lead straight back to foreclosure. Even through the government modification programs, many banks only approve repayment plans instead.

While these three alternatives discussed here are currently the most popular, homeowners need to be aware of the benefits and drawbacks of all of the solutions to foreclosure. In most cases, losing the home can be avoided if the borrowers know where to focus their efforts, rather than wasting time on popular, but inappropriate ways to stop foreclosure. Foreclosure is a matter where time is of the essence -- there is no good reason to waste it pursuing bad alternatives.

When it comes to bankruptcy reform, the only type that the politicians and bankers like is changes which make it more difficult, more time consuming, and less efficient for borrowers and homeowners. The point is to push foreclosure victims into a difficult bankruptcy, while the banks themselves get bailed out by these same taxpayers to avoid the same fate.

Over the past year of the housing crisis, with foreclosure rates remaining at historic highs, one of the proposals to fix the problem was allowing bankruptcy judges to reduce the amount that homeowners owed on a first mortgage. This would have made it easier for the borrowers to pay back part of the loan in the event the property value had fallen.

Of course, the fact that this solution makes some sense and is perfectly acceptable in the case of second homes and other types of debt and other types of bankruptcies (Chapter 11, for instance) did not change the banking industry's opposition to it. Although giant corporate-government bank Citigroup supported the bill, the Senate defeated legislation that would have allowed it.

Homeowners facing foreclosure, according to the politicians, should not be able to enter into a government bankruptcy court and have their mortgage balance reduced. Instead, they should be forced to enter into a government foreclosure relief program to have their mortgage balance reduced. The key difference is how much control the banks have over the reduction.

In most of the government programs to help homeowners qualify for mortgage modifications, the lenders participation in the plan is voluntary. And in practice, the lenders' participation has been lukewarm at best or nonexistent at worst. Take, for example, the FHA Hope for Homeowners program, which has been given $320,000,000,000 in taxpayer money and has helped one single homeowner.

Thus, the government modification programs have been a disaster because they allow banks to work as hard as they want to help borrowers. The banks, in turn, give homeowners bad deals or fail to negotiate in good faith with borrowers. Instead, they rely on their bailouts and other free money programs to prevent them from having any motivation to assist borrowers in stopping foreclosure.

The banks know that, if homeowners could file bankruptcy and get their mortgages modified, there would be fewer reasons to go to the government for free handouts. Borrowers would be able to file a Chapter 13, have the mortgage balance reduced to the market value of the home, and be able to make payments to the lenders again. This would be a tragedy for the lobbyists and mortgage companies!

One of the objections to the legislation was that it would make mortgages more expensive. But during the real estate boom, mortgages were as expensive as they ever have been. Although this was not in terms of interest rates, once the bubble inflated to astronomical levels, the amount of a loan a borrower needed to take out just to qualify for a mortgage was extraordinarily high.

The Federal Reserve had lowered interest rates to historic lows. Banks reduced lending standards knowing they could get bailed out by the government if anything went wrong. Loans were given to people who could never afford to pay them back, inflating the demand and rising prices even further. Some of these loans reset at high interest rates after a few years on extremely overvalued properties. None of this was a good deal.

And now, the main objection to allowing bankruptcy judges to reduce mortgage balances is that it would make it more expensive to take out a mortgage? How could it be any more expensive than taking out a loan for 250% of its actual value at a teaser rate that would reset to 12% interest in a couple of years? The banks could not make the mortgage market any more expensive if they tried.

Regardless, the banks worked hard to lobby politicians to defeat the legislation, and now the mortgage banking industry is celebrating its victory. But what have they won? Nothing more than ability to force homeowners to keep paying for properties that are overvalued, while the banks themselves line up to receive more and more taxpayer money in order to avoid the same fate of a difficult bankruptcy.

With all of the positive press about the new government programs to address the housing crisis and work with homeowners to modify predatory defaulted mortgage loans, one would think that the government could do modification programs better than borrowers and banks working together. Unfortunately, the government has proven even more inefficient than the banks.

One of the scapegoats of the economic crisis has been the subprime mortgage lending industry, which supposedly made thousands of predatory loans to unsuspecting homeowners in an absence of regulation and government oversight. Now, after the failure of the markets have been uncovered, government has to step in and solve the problem.

But the government regulators were involved in the subprime market even before the real estate boom turned into the housing bubble. In 2001, the Federal Deposit Insurance Commission (FDIC) seized Superior Bank, FSB, in Hinsdale, Illinois. At the time, Superior was a subprime mortgage lender, making loans with high interest rates to unqualified borrowers.

Instead of closing down the bank's subprime lending division, the FDIC kept it open and operated it. Usually when the FDIC seizes a bank, it will shut down the operations completely, especially if they are of such dubious nature as certain subprime loans were. But the government kept the bank open and made subprime mortgages to new borrowers.

Furthermore, this was not just a temporary measure to fund the final loans Superior was working on before being seized -- the FDIC funded $500 million in close to 6,700 new subprime mortgages during the months it was operating the failed bank. So the government regulators played a direct role in inflating the housing bubble and providing predatory loans.

What if the government made more efficient, more compassionate, more hopeful subprime loans than the average mortgage lender? Then the loans may be understandable and prove that the government has the resources and business acumen to generate positive results from what has been labeled a predatory business practice.

However, this is not what happened. The loans that Superior made while under FDIC control were just as bad as many other subprime loans, and were plagued with the same problems. Inflated appraisals, poor income verification of borrowers, and loans that should never have been made were just as common with the government loans as private loans.

The government either did not see how subprime mortgages were fueling the housing boom, or the regulators did recognize the problem but decided to take advantage of borrowers in order to boost the government bank's profits. In either case, can we really trust these same regulators to fix a problem they did not see or saw but took advantage of?

Now we are expected to put faith in the government's programs to help homeowners in foreclosure by subsidizing mortgage modifications. Are some of the same borrowers who received subprime loans from the FDIC eligible for this new program? Unfortunately, with the government relying on inflated appraisals and failing to verify income, probably not.

Most of the programs put in place thus far to address the housing crisis have been complete disasters. The FHA Hope for Homeowners Program has helped one single borrower, despite having a budget over $300 billion. But each failed plan generates proposals for more plans that are remarkably similar to each other.

From the very top of the government at the Federal Reserve, down to the financial regulators at the FDIC, the subprime mortgage market was fueled by low interest rates and bad loans made directly by the government. Now homeowners are supposed to trust the very same people who inflated the bubble and collapsed it to stop foreclosures and punish bad lenders.