The election process has always been less an expression of the democratic will of the people than a mass herding of uninformed voters tricked into choosing between two virtually identical candidates supported by the same large financial and corporate interests. Especially now, though, with foreclosure rates rising and more fraud in the mortgage markets being uncovered by the day, solving the housing crisis has become a political tug of war for both of the major candidates, John McCain and Barack Obama.

Both candidates have outlined plans to help homeowners facing foreclosure, and while few voters typically read through even such sparsely informational sites as the candidates' own websites, it can be seen from a short analysis of the proposed policies if either nominee will be able to provide assistance to the markets. The issues will be examined for each candidate, with the Republican nominee analyzed first.

Although the site says McCain's "approach to helping sub-prime or other financially strapped mortgage borrowers is built on sound principles," what it means is that the focus is on contradictory principals:

No taxpayer money should bail out real estate speculators or financial market participants who failed to perform due diligence in assessing credit risks. Any assistance for borrowers should be focused solely on homeowners and any government assistance to the banking system should be based solely on preventing systemic risk.

Thus, McCain would not bail out lenders, mortgage companies, or financial firms unless they had invested heavily in the subprime credit markets and their poor decisions would result in risk to the financial system overall. But this immediately raises the question of moral risk: If you were going to speculate, why not go all the way and leverage as much as possible, so if you failed, the government would have to bail you out to prevent systemic risk? Small speculators will presumably be allowed to fail, but the big ones will have their larger moral hazards rewarded by tax or inflation money.

McCain also proposes a HOME Plan designed to keep 200,000 to 400,000 homeowners out of foreclosure, but this is a small drop in the bucket of several million expected foreclosures nationwide. While such a plan may have an impact in certain local markets, with a general falling of home values across the country, saving an extra few hundred thousand families will do little to help the markets recover.

Eligibility for the HOME Plan is also strict and will preclude many borrowers from even qualifying for federal assistance:

Holders of a sub-prime mortgage taken after 2005 who live in their home (primary residence only); can prove creditworthiness at the time of the original loan; are either delinquent, in arrears on payments, facing a reset or otherwise demonstrate that they will be unable to continue to meet their mortgage obligations; and can meet the terms of a new 30 year fixed-rate mortgage on the existing home.

While the owner-occupied requirement is obviously designed to avoid awarding speculators with financial assistance, the failure of speculators and investors is one of the driving forces of the housing crash. Subprime borrowers began to default, home prices stagnated, and speculators have simply walked away from properties, leaving the houses to foreclosure and the communities to endure further drops in home values. The foreclosure of these homes are entirely justified, but they will continue to contribute to a declining real estate market.

As well, McCain's plan's requirement for homeowners to prove creditworthiness at the time of the original loan may be quite difficult for subprime borrowers who took out stated income or no-doc loans and overstated the amount of money they made or the assets they owned. These homeowners will almost certainly receive no assistance from the government, as even politicians will not want to take on the risk of mortgage customers who never qualified for a loan in the first place. But with such a large percentage of home purchase and refinance loans over the past years being subprime, the fact that subprime borrowers will receive little help negates the goal of the HOME Plan.

Typically for political programs, at least one Orwellian Newspeak clause must be included, and McCain's policy does not disappoint. It states, "Any policy of financial assistance should be accompanied by reforms that promote greater transparency and accountability to ensure we never face this problem again." Obviously, the several tens of thousands of pages of federal regulations already on the books will not be adequate to ensure corporate transparency, so thousands more pages will be added, increasing the costs to keep up with the new laws, increased costs which will be transferred to mortgage borrowers.

Homeowners who took out loans during the boom and bubble were given dozens of pages of disclosures relating to the terms of the loan they were applying for. Shockingly few of these borrowers ever read or made sure to understand the documents in full, though, and even corporate lawyers have been unable to pierce the veil of the legalese and explain in ordinary language how the mortgages actually work. More disclosures will just increase the likelihood that loan customers sign the stack of papers in front of them without reading as quickly as possible in order to get the loan they have been sold by the broker.

Again, as with the Democratic plan to solve the housing crisis, little is proposed to hold the Wall Street financial firms accountable, or even acknowledge their existence in the crash other than as victims of shady, lying borrowers. But these investment firms provided the lines of credit to the largest lenders, which made subprime loans, which then sold the loans back to Wall Street, which securitized the loans, which then sold the toxic mortgage-backed securities to funds around the world, taking in fees at nearly every step of the process. Of course, though, these are the firms whose failure would cause "systemic risk" to the financial system and which also donate heavily to the Republican and Democratic parties, and will be given generous bailouts by the federal government to ensure they do not fail.

Every time government officials successfully trick the people into voting to give government more power and continue its existence for another four years, special interest groups and power-hungry bureaucrats are given nearly free reign on plundering ordinary citizens. With a housing crisis already underway, though, tricking homeowners into voting for a particular candidate for president is a high priority for both Barack Obama and John McCain, each of which has available on their websites an outline of a plan to solve the foreclosure mess.

The small number of people who actually wish to inform themselves of the issues before going to vote may wish to read the candidates' proposals, only a sample of which will be detailed here. The issues will be examined for each candidate, with the Democratic nominee analyzed first.

From Obama's website comes this about the subprime mortgage industry:

Ensure More Accountability in the Subprime Mortgage Industry: Obama has been closely monitoring the subprime mortgage situation for years, and introduced comprehensive legislation over a year ago to fight mortgage fraud and protect consumers against abusive lending practices. Obama's STOP FRAUD Act provides the first federal definition of mortgage fraud, increases funding for federal and state law enforcement programs, creates new criminal penalties for mortgage professionals found guilty of fraud, and requires industry insiders to report suspicious activity.

The subprime industry has been largely self-regulating at the highest levels: when Wall Street investment firms made billions of dollars in fees generated from tricking homeowners into loans they could not afford, the industry took off. As soon as defaults began to rise, buyers for CDO, ABS, MBS, and other similar mortgage-backed bonds disappeared as investors realized that lending standards had been eliminated in an effort to increase revenue. By now, Obama's plan to regulate the subprime industry is a moot point, as hundreds of lenders have gone out of business after being forced to buy back their terrible loans which defaulted almost immediately upon being made.

While holding lenders and mortgage brokers accountable may seem like a good idea, it does not go nearly far enough to hold those truly responsible for the foreclosure crisis accountable. Wall Street firms provided the money that was loaned, and they bought the mortgages from the lenders to securitize and sell to investors. Without holding the Bear Stearns, Morgan Stanley, and Lehman Brothers of the world responsible, new bubbles will just appear in other market sectors as the subprime pump-and-dump strategy is followed again.

And Obama's plan does not even address the true first cause of the mortgage bubble: artificially low interest rate policies from the Federal Reserve under Chairman Greenspan. A historically cheap money policy and liquidity injections into the financial system could do nothing else than create a bubble somewhere, and real estate was all the rage. At worst, the Fed should have risen interest rates to deflate the bubble; at best, the Fed should be abolished for its role in creating and inflaming every market bubble of the past nearly 100 years.

Another proposed regulation is this:

Create Fund to Help Homeowners Avoid Foreclosures: Obama will create a fund to help people refinance their mortgages and provide comprehensive supports to innocent homeowners. The fund will be partially paid for by Obama's increased penalties on lenders who act irresponsibly and commit fraud.

Even hundreds of millions of dollars in fines against mortgage companies only comes out to an extra few hundred dollars at best of assistance for the millions of homeowners facing foreclosure, and that is not if the mortgage assistance fund is depleted by bureaucrat salaries. Also, any new potential penalties will be factored into mortgage rates and fees by the lenders, who will push the extra contingent liability costs onto the end consumers. It can only be assumed, as well, that the rest of this fund will be paid for through more inflation and borrowing from the Federal Reserve.

Disclosure rules are also a focal point of Obama's plan:

Mandate Accurate Loan Disclosure: Obama will create a Homeowner Obligation Made Explicit (HOME) score, which will provide potential borrowers with a simplified, standardized borrower metric (similar to APR) for home mortgages. The HOME score will allow individuals to easily compare various mortgage products and understand the full cost of the loan.

Mandating more disclosures is quite possibly the most useless proposal so far, as home buyers never read their disclosures anyway, and brokers who want to generate fees and homeowners who want a house they can not afford will sign or say anything to qualify for the loan they want. Mortgage applicants already receive dozens of pages of disclosures, even ones that specifically state they are getting an ARM loan and how ARM loans work; more disclosures will just add to the paperwork that is signed, never read, and filed away in a drawer for years until there is a problem making the mortgage payments.

Some of the more positive aspects of Obama's plan include a small tax credit and allowing federal bankruptcy judges to lower mortgage balances for homeowners owing more on the loan than their home is worth. While the tax credit comes out to around $500, any tax break is better than no tax break, especially for lower income workers. And allowing judges to lower mortgages in bankruptcy cases would give borrowers an incentive to keep paying on their property if able, rather than walk away from a house in foreclosure.

Unfortunately, Obama's housing crisis plan indicates his close alignment with the financial power centers on Wall Street. His plan will make the people pay for the bailout of investment firms by funding government bailout programs that will have to be paid for by more inflation from the Federal Reserve. As well, he wants to hold the lower-level facilitators (out of business lenders and out of business brokers) of the (out of business) subprime industry accountable, while not touching the loan funding and securitizing machines on Wall Street, from whom he has received many campaign advisers and contributions.

Two of the aspects of foreclosure that banks rely upon when attempting to steal homes from borrowers is homeowners' ignorance of how the mortgage works and what information the lender really needs to show to prove it has a case. But if the homeowners remain in the dark, and banks are not challenged on the issues, the courts will allow the lawsuit to proceed as far as possible, including evicting homeowners for the sake of banks who may not even have a right to complain. A couple of written requests made by homeowners to lenders, however, can have dramatic effects on a bank's willingness to negotiate a more reasonable solution.

As has been mentioned in numerous articles, it seems that mortgage companies are having a difficult time producing the original note that proves that they bought the loan and have the right to foreclose once the payments are delinquent. Judges have thrown out dozens of cases where lenders could not show they were even entitled to collect the monthly payments because they could not conclusively show they owned the mortgage. Homeowners should take advantage of this by requesting the promissory note that they signed when pledging their house as collateral for a mortgage.

In fact, this written request can be quite simple, comprising only a few sentences giving the bank a couple of weeks to produce the note for the borrowers' inspection. Since the house is security for the loan, the bank should be able to show the document is in its possession within a period of ten to fifteen days, at the most. If the owners receive a form letter back with anything other than the promissory note, it may be an indication that the information is not in the lender's possession, and there may be no ability to sue for foreclosure.

Borrowers dealing with a loan servicing company, which owns only the rights to collect the monthly payments, may have even more complaints about junk fees, forced insurance, escrow account deficiencies, and other equity stripping scams. Thankfully, the government has provided an avenue for homeowners to send a "Qualified Written Request" (QWR) to their mortgage companies in order to have their complaints addressed. Section 6 of the Real Estate Settlement Procedures Act (RESPA) outlines the terms under which such complaints may be made.

The mortgage servicer must acknowledge receipt of the QWR within twenty days, and respond to the complaints within sixty days. The bank may either correct the situation or explain its position to the homeowners, but it may not ignore the written request. Although it is unlikely to win a lawsuit against such a mortgage company, noncompliance with the Act leaves the lender open to private lawsuits for three years after its inability to respond properly to the QWR. Class action lawsuits may be more effective, and there is also a three-year time limit for initiating those.

When homeowners are facing foreclosure, they often see their equity quickly disappear under a mound of fees and interest charges that may not even be entirely legal. In addition, the bank attempting to take the house might not even have standing to complain or be able to prove it owns the mortgage it is claiming to collect on! For the small cost of postage for certified mail, sending a request for the promissory note as well as a Qualified Written Request under Section 6 of RESPA may be a simple way to begin the process of defending against the bank's attempted real estate theft.

(Note: for any sample copies of a Qualified Written Request or a letter to produce the note, please email us for an editable sample letter.)

The most important factor homeowners in foreclosure need to remain aware of is how much time they have left to work out a solution, either to save the home or unload it with the least financial damage. The bank, working through its local attorneys, will typically attempt to push through the legal process as quickly as possible, in order for the lawyers to get paid and the bank to have an empty house they can sell on the market. Homeowners, on the other hand, would like more time and negotiating room in which to put together a more beneficial solution.

One of the easiest, most effective ways to get more time to stop foreclosure is just to ask the lender for help. A call to the mortgage company, followed by a written request, can postpone the initial filing of the foreclosure lawsuit, or even convince the bank to delay a sheriff sale just a few days before the property is scheduled to be auctioned. Since the lender is in control of the entire process of taking the house, it can dictate if and when it wants the courts or local government to proceed with certain aspects of the case.

However, simply flooding the mortgage company with delay requests, while effective once or twice, is not a long term solution to foreclosure. In fact, every time the homeowners ask for more time, they should be working on a specific plan that will help get the house completely out of the legal process and pay off the loan or pay back the arrears owed on the loan. Banks are much more willing to extend the time to save a house if it looks as if the borrowers are actively seeking out realistic methods.

Some banks, though, will eventually reach a breaking point at which they will no longer be willing to extend a sheriff sale or help out with any other solution the homeowners present. At this point, there may be two other ways that the borrowers can get more time to save the house, both of which involve entering the court system. The first way is to file bankruptcy, while the other involves defending the original foreclosure lawsuit.

Once homeowners file either Chapter 7 or Chapter 13 bankruptcy and include their house debt in the petition, the lender must cease all collection efforts. This includes halting the lawsuit at whatever point to which it has progressed, and canceling any scheduled foreclosure auction of the property. As long as the property is tied up in the federal bankruptcy court, the mortgage company has no other option other than to work with the trustee to attempt to collect on the mortgage debt. This can tie up the house for several additional months while the owners either negotiate down the debt or work on another final solution.

And while some homeowners may not wish to enter the local courts to defend against the bank's lawsuit against them, this may be the single most effective way to get more time and prove to the bank that the owners are not willing to go down without a fight. Potential predatory lending or other lender misconduct may be enough to convince the bank that working out a mortgage modification or delaying the auction to help the borrowers sell their home will be less costly than litigation. As well, any motions or defenses the homeowners bring to the courts may take additional months or years to resolve, not to mention possible appeals.

Too often, homeowners in foreclosure are working on a solution that would stop the foreclosure process completely, but they are just running up against a deadline, after which the solution would no longer be viable. It is in these cases that borrowers should do everything they can just to get more time. The easiest way to do this is simply to request the bank to hold off on any more foreclosure proceedings, but bankruptcy and litigation are also quite effective at postponing an eviction. As always, though, it should go without saying that, unless the owners have some reasonable solution, constant delays will only prolong the inevitable.

Amidst all of the talk of economic Armageddon, falling home prices, a declining stock market, rising foreclosures, a weak dollar, and food and energy inflation, it is difficult to find many bits of good news for the average homeowner. Since the subprime crash and credit crunch, seriously negative conditions have been prevailing in the market for over a year now. But it is also important for all people to look forward to something potentially positive in the days ahead.

Housing prices are going to continue falling for quite a while, which is a negative for many homeowners, but will bring values down to the level of real affordability. The real estate bubble was pumped full of artificially low interest rates and cheap money; along with declining lending standards among large banks and small lenders alike, the crash was inevitable after a historic run-up in home prices. In fact, prices are falling to levels not seen since the early 1980's, which may soon open up the markets again as consumers are finally able to afford to purchase properties without resorting to unnecessarily complex mortgages.

The low interest rates that prevailed years ago is having a direct impact on rising prices in the economy right now. Interest rates can affect the cost of short term borrowing as soon as they are changed, but the long term effects are not seen until years later. So rising commodity, food, and energy prices may simply be a result of the extremely low interest rates the Fed used to combat a perceived (but entirely incorrect) threat of deflation after the 2001 slowdown.

Because of these too-low interest rates, the dollar has been getting steadily weaker, and the Fed's policies of exchanging subprime mortgages for Treasury securities has not helped. But now the rest of the world is following the American example and devaluing their own currencies just as the Federal Reserve has been either rising or holding steady interest rates. This is having the effect of strengthening the dollar and actually reducing prices slightly in the commodity and energy markets.

Oil also bears mentioning as a potential positive; namely, a stronger dollar will decrease the price of energy. As well, at around $140 per barrel, oil sells for about twice what it costs to produce it, which should be a clear sign of either its relative scarcity or that there is a bubble in the market. Foreign countries, which had historically subsidized oil and gasoline prices for consumers, are ending these subsidies, which will instantly drive up prices at the pump. For many people, this will necessitate a decrease in demand, driving prices in America down further.

Although these are just a few, relatively small, positive signs for the economy, they may provide some relief to homeowners and open up the housing market again, or at least take off some of the financial burden. And the best part of each of the examples listed here is that they involve either no government interference or less government interference in the markets, which may lead to prices actually declining for once. Granted, there are still serious threats to consumers that will need to be overcome, but the bottom of the market may finally be on the horizon.

As most homeowners should already know, going through a foreclosure will drastically effect their credit rating. Not only do the numerous missed payments themselves cause severely negative marks, but the status of the home in the courts, the judgment, and other legal problems leading up to the legal foreclosure filing can be enough to ruin your credit, even without the possibility of losing the home in a sheriff sale.

If you are a homeowner, then you probably have not rented an apartment in a while, but today, the vast majority of landlords will perform some sort of background check, which usually involves a credit check. The days of meeting someone and renting an apartment the same day are virtually gone.

Most landlords require a credit score exceeding 700 and income three times higher than the rent price. If you can not meet the credit score requirements, then a higher down payment for the security deposit may help, but most places simply will refuse to rent to you.

Most foreclosure victims have very little money to use as a down payment and have credit scores well below 600, which makes finding a rental very difficult, if not impossible. Even if you have the income requirements, saving money for a down payment will require time, and keeping your job is much easier with a home. It is a Catch-22 situation -- you can not get a home without a job and it is hard to keep a job without a home.

Here are a few tips for someone who has been through foreclosure, or is having problems renting:

1. Be honest with the person you are renting from. They will most likely run a credit check anyway, so do not try and hide the fact that you have been through a foreclosure. This can also save everyone from a lot of wasted time.

2. Rent from an individual, not a real estate agent or leasing company. Individuals will make a decision based on you as a person, not just your credit report. Even though an individual may still check your credit, if you are honest with them up front, you may still get the apartment.

3. Always provide proof of income and a list of references who can verify your ability to make the payments as agreed.

4. Negotiate the rental price to make it as affordable as possible. Also, do not assume that you have to get pushed around or forced into poor living conditions, just because your credit is not perfect.

5. If the down payment is too high, ask if they will allow you to pay the down payment over time, in addition to your payments. For example, if rent is $1,000 per month and there is a $1,000 deposit, you may ask if paying $1,250 for the first 4 months is acceptable.

If you have tried all the tips above and still can not find anyone to rent to you, then there is still one more option. There are many vacation rentals or temporary housing rentals available with no deposits and no credit checks. These rentals are available in almost every area of the country and can be found using local news papers, or the Internet. I have found many of these locations locally for our clients online well as local newspapers under vacation rentals. You can find homes, condos, and apartments advertised for people looking for a short term rental.

These places are usually advertised at a much higher rate than you will ever be able to afford, so you will need to negotiate with the owner to get the best possible rate. It is possible to run across some rentals that normally rent for $2,000 a week for $900 per month! The key is to find a place that is just sitting empty; the owner would rather get a little less money, rather than leave it essentially abandoned and generating no cash flow.

Obviously, any option to avoid foreclosure, even if it means selling your home, will be better for your credit report, but if your credit has already been affected, then hopefully you can uses the tips above to find an apartment, even if it is just short term, until you get back on your feet again.

One of the most devious aspects of the mortgage industry is how loans are originated, packaged into large deals, sliced up, and sold to investors around the world. All the while, the borrowers are led into believing that the company they are making payments to is the owner of the loan. Nothing could be further from the truth, and it is in the interests of homeowners to find out who really owns their mortgage, especially if they are being sued for foreclosure.

At every step in the process of originating and securitizing mortgages, the potential exists for the banks to violate any number of federal or state laws designed to protect homeowners against predatory lending. If it can be found that the bank has broken any of these consumer protection laws, its ability to proceed with a quick foreclosure is drastically diminished; in fact, it may be better for them at that point to offer a mortgage modification or other solution to avoid a lengthy, expensive legal process.

The originator, servicer, and holder of the mortgage are three entities that are vastly different from each other. While the originator approves the loan and secures the funding (from customer deposits or lines of credit through Wall Street investment firms), the mortgage servicer is the company hired to collect payments and proceed with foreclosure in the event of default. The holder of the mortgage is the eventual owner of the loan, but who this ends up being is usually quite unclear.

Especially with the large-scale securitization of the mortgage industry over the past decade, finding out who actually owns the loan paperwork can be downright impossible. In a typically confusing deal, a large pool of mortgages are originated and immediately sold to a Structured Investment Vehicle (SIV), which is created solely to hold the mortgages and act as a middleman between the servicer and end investors.

Then, the rights to income from these loans are cut up into "tranches" and the tranches are then sold to investors such as pension funds or hedge funds in the form of bonds. The right to collect the payments from the homeowners is given to the servicer, who then forwards the payments to the SIV, at which point the income is divided into the appropriate tranches and sent to investors.

But who actually owns the mortgages that the SIVs hold? Because unless the owner of the loan forecloses on the house once the payments are in default, the company suing the homeowners may have no legal ground to stand on. People can not be sued for defaulting on a debt by just anyone -- they only entity that can sue is the one who owns the loan (on its own or through attorneys). When mortgages are sliced up and held in specialized vehicles that do nothing except act as a conduit between the servicing company and the investors, ownership of the loan becomes a little fuzzy.

Back at the mortgage servicer, though, when properties fall behind in payments, it is the servicing company that is expected to proceed with the foreclosure. Even worse, the servicing company may only have received the rights to collect the payment and have no idea who has possession of the original loan paperwork. When they try to sue, if challenged, they may be unable to show the note. Without proving to the courts that they have the note, it is simply impossible for them to sue for foreclosure of the loan they have no ownership interest in.

Homeowners may find that they have no idea who has the right to their payments, who they can negotiate with to stop foreclosure, or who is in possession of their mortgage. Once they begin asking questions to find out this information, they may quickly realize that no one else has the answers, either. But this rarely stops the banks from pursuing foreclosure through the courts, since the banks have so many more resources than the typical borrower. Knowing that this "who owns the note" challenge can not be adequately explained, though, homeowners should begin using it more often against predatory lenders.

Every homeowner facing foreclosure, whether it is possible to save the house or not, should do everything possible to put their finances in order before being forced out of the property. In some states, though, the foreclosure process lasts only a few months, which is not always enough time to recover from a hardship and begin to get out of debt and establish a savings plan. This is why most borrowers should do everything they can, in and out of the courts, to delay the sheriff sale and eviction.

The best way to begin gaining extra time to save up, pay down other credit lines, or just find a new place to live after foreclosure is to fight the banks in the local court system. The lender can not take a house through foreclosure without using the county courts, and the (lack of) speed at which government organizations do business can work to the owners' advantage. Once the bank begins its lawsuit, the clock starts ticking -- but homeowners can also push give themselves months worth of extra time simply by playing by the court's own rules.

Once the initial lawsuit paperwork arrives, either via mail or served by a processor or county sheriff, homeowners need to determine how much time they have to file an answer. They are given a specific time period in which to file their answer to the complaint with the county clerk and serve a copy upon the lender. File too late and it is thrown out for not having been completed in time; file too early and the time for foreclosure is shortened. If the courts give defendants 28 days from the date of service to answer a complaint, homeowners may want to file their answer on day 26 or 27.

Then, when the lender gets its copy of the answer to the complaint, it may have another brief period of time to respond, and then the homeowners get a chance to respond to the bank's newest arguments. All of this can take several extra months where the legal process has not made much, if any, progress. As well, this is all before any trial or hearing is set to discuss the motions in front of the local judge in the case. Two extra months of living mortgage free can mean a great deal for homeowners attempting to get back on their feet.

Also, it may not even really matter what arguments the homeowners make in their answer. Although they should contact an attorney or do the requisite legal research on their own to make the best defense possible, if the goal is simply to drag out the process and make the bank prove every aspect of its case, there are a number of ways to delay and argue every minor point. Homeowners can argue that the court does not have proper jurisdiction, the bank did not file its paperwork in accordance with the rules of procedure, the lender does not have possession of the loan and has not standing to complain, and so on. Every argument will require an answer by the bank and will take weeks or months to be heard by the court.

But even this is not the end for each motion that the bank or homeowners file in the foreclosure lawsuit. Whenever the judge makes a decision, either denying or granting a motion, the homeowners can appeal that decision to the higher courts. These types of appeals are called interlocutory appeals and are typically used when a decision may be severely prejudicial to one party. Although it may cost a few hundred dollars to open a case with the appellate court, this process can take up to six months in some areas -- a few hundred dollars to live mortgage free for an extra half a year is certainly worth it for homeowners who need the time. And an appeal can be made on any court decision from pretrial motions to the final judgment.

If all else fails and the owners lose the case due to the bank's diligence in obeying all laws (not likely) or the corruption of the local courts (more likely), the last resort may be to file bankruptcy to stop foreclosure just a few days before the sheriff sale. This can delay the process for an extra few months via the Order for Relief (automatic stay) that prohibits creditors from engaging in any further collection activities after the bankruptcy is filed. In fact, it may be best at the end to discharge the mortgage in Chapter 7 proceedings, stay as long as possible in the house, and then never have to worry about a deficiency judgment.

Homeowners should not have as their primary goal buying a house, defaulting on the mortgage, and then living rent free for nearly a decade. But banks should also not be given a free pass to foreclose on houses without a fight from borrowers. At the very least, homeowners should contest the bank's ability to sue them and make it produce the documents proving it owns their mortgage. For too long, lenders have relied on rising property prices and borrowers unfamiliar with the government court system to make obscene profits through foreclosure; now, with home values in decline and more homeowners facing homelessness than ever before, it is long past the time for them to make a stand.

From the first government mortgage bailout to the latest one, it seems that no matter how hard the central planners in Washington attempt to alleviate the suffering of millions of American homeowners, the foreclosure crisis rages on. The failure of every one of these plans so far indicates that, no matter how much money bureaucrats take from one homeowner to give to another, the financial shock that began a year ago will continue at its own pace. While the reasons for any government failure are too numerous to count, here are the top six why the housing bailouts have not helped.

1. Income documentation. Many of the plans, to prevent speculators or liars from cashing in on public welfare for foreclosure victims, require borrowers to verify they have enough income to make reasonable monthly payments. With over half of subprime borrowers expected to have overstated their earnings in order to qualify for higher loan amounts, documenting their real income will instantly disqualify them from any government programs. Both FHASecure and the new Freddie/Fannie bailout package require borrowers to verify their income, which is why foreclosure of liar's loans and those purchased by speculators are still driving the housing market crisis.

2. Minimum equity requirements. FHASecure and the latest bailout of the Government Sponsored Enterprises require that homeowners have at least three percent equity in their properties in order to refinance to a government guaranteed loan. Either the lenders will have to write down the loan to a lesser amount, or the owners need to make a down payment. The problem is that mortgage companies do not want to take such a large loss on a house when it is just as easy to go through with the foreclosure and attempt to sell on the open market.

3. Second and investment homes excluded. Another problem with many of the government programs is that they are designed only to help with a primary home. Rental or vacation homes are disqualified from any public funds. While this may be a good idea to keep speculators' hands out of the public cookie jar, it shows a failure to realize that rampant speculation drove the housing bubble -- leaving them on their own to suffer now necessarily means that prices will come down and homes losing money for investors will be abandoned.

4. More expensive solution offered by banks. With Project Lifeline and the Hope Now Alliance, lenders were recommended to offer homeowners in trouble a mortgage modification or repayment plan in order to get back on track. Unfortunately for foreclosure rates and borrowers, most banks simply offer a payment plan, doing nothing to modify the terms of the loan to be more affordable. Few homeowners struggling with their current payment are able to pay even more per month to repay the arrears, which is the biggest reason these programs have been utter failures.

5. The problem of second mortgages. For home equity line of credit and second mortgage holders, the options offered by the government amount to one solution: write it off. Understandably, few mortgage companies are willing to do this; although they know there is little chance they will get anything from a sheriff sale, the chances are higher than with simply giving up on the loans. The newest bailout package for Fannie and Freddie is not available to homeowners who can not shake off their second mortgages; while subprime loans, which are foreclosing at the highest rate, were typically made with automatic second mortgages at the time of purchase (80/20 loans).

6. All programs are voluntary. But by far, the biggest problem with all of the programs offered to date by the government is that they are 100% voluntary for lenders to participate in. If the mortgage company believes it will make more money in the end by foreclosing, there is nothing to force it to help homeowners stop foreclosure through any program. In fact, with the Federal Reserve coming to the rescue of the banking system over and over again with hundreds of billions of dollars of free money and loans, it may be in the best economic interests for lenders to let homeowners fail in droves, crying that the banks are the victims of predatory borrowers and lining up for more corporate welfare than homeowners could ever dream of receiving.

Although it is quite noble for neighbors and family members to wish to help out homeowners in distress, requesting government to step in and fix the foreclosure crisis will only produce more failed programs and more empty houses. For an organization that claims on monopoly on the use of force, the federal government has been tellingly reluctant to force banks to assist borrowers when the loans that have driven the economy off the cliff were clearly, for the most part, predatory mortgages. For bureaucrats who have no problem telling foreign countries how to live, manipulating interest rates in the American economy, and spying on every person in the country, they seem not to want to turn their power on the large financial interests. But is that an indication of where the real power lies?

Putting together any reasonable plan to avoid foreclosure and following it through requires hard work from homeowners, lenders, and any third party companies that are involved. Because of the long legal process, high foreclosure rates, and the fact that many borrowers lack knowledge of how their mortgage works, it can take months to find a solution. But for homeowners who are unable to save their homes, it is not always simply their fault.

No matter how hard some borrowers work towards finding a solution to foreclosure, sometimes there are circumstances that will not allow them to fix the situation. Unfortunately, most of these circumstances revolve around the mortgage company's unwillingness to offer any meaningful, realistic plan that the owners would be able to complete. Expensive repayment plans or declined loan modifications without a counteroffer or explanation do not help families save their homes.

With the foreclosure rate having increased by over 50% from a year ago, and numerous government programs being created to help homeowners, banks have fallen far behind on providing assistance to defaulted borrowers. Some loss mitigation representatives report having hundreds of cases to work on, and in states with a quick foreclosure timeline, homeowners may find themselves facing a sheriff sale before they have made any real progress towards applying for a modification or foreclosure loan.

While some lenders may be willing to halt a sheriff sale in order to give borrowers more time, this is simply postponing the inevitable if the bank does not utilize enough resources to provide a final solution to stop foreclosure. A few more weeks of bank representatives not returning calls or answering their phones when owners call and the property auction will have to be postponed again. But with each such delay, more legal fees, interest, late fees, and other charges are added to the loan, making it more difficult for the owners to pay off the arrears.

In fact, the failure to communicate with clients is possibly the most frustrating aspect of the process of losing a home. Neither the bank nor its local attorneys are usually any help in getting timely information to owners, with the lender having to check with the attorneys and the attorneys having to check with the lender for even such simple figures as a loan payoff. And neither the bank nor the lawyers ever call back the owners to provide them with the requested information -- if homeowners want to find out what is going on with the loan, they must do everything on their own or hire a company to provide assistance.

Thus, it is not surprising that so many mortgage companies and servicers are suspected of deliberately pushing homeowners into foreclosure and jacking up the fees once payments are missed. Houses with significant equity can be underwater in just a few months, once the bank adds interest, late fees, interest on late fees, and legal expenses. Then they refuse to communicate with owners who are attempting to work out a solution to prevent the foreclosure from going all the way through.

But the whole lending system in this country has been based on an adversarial system in which banks have the ability to cheat by creating money out of thin air. Loans are only created by the signature of borrowers and their willingness to pay the lender a certain sum of money -- but the money does not exist until the borrowers promise to pay it back. And when they are unable to pay back money that did not exist until the lender created it... well, then the bank gets to take the house and attempt to sell it on the market to make up its "loss" on money it never had.

Although banks are quite adept at playing the victim card and pretending that they are losing money hand over fist due to deadbeat homeowners, the opposite is the case. Owners were propagandized during the housing bubble, given mortgages with predatory terms, and tricked into taking out as much money as possible in order to consume more for the good of the economy. Resetting monthly payments and decreasing property values, while creating paper losses for lenders, have put millions of former homeowners into the street.

Now bailouts are given to the banks and investment firms through the Federal Reserve's inflation machine, while homeowners are given new laws and government programs to attempt to qualify for in a vain attempt to keep their homes. While the higher prices all of us pay for food and energy are now mandatory on us, though, these new programs for foreclosure victims are 100% voluntary for the mortgage companies. So when the loss mitigation department never calls back to go over a mortgage modification, the bank can still claim to be participating in the government system, albeit voluntarily.

Homeowners are always receiving tips on what to do to save their properties from being taken away by foreclosure. Call the mortgage company right away, speak with an attorney, put the house on the market just in case, and many other pieces of advice are important and can mean the difference between preventing foreclosure and ending up homeless. But there are also a number of things to avoid when a house is in danger of being auctioned off and the owners eventually evicted.

The most important aspect of the foreclosure process that needs to be kept in mind is that the lender has most of the power to continue with or halt any legal proceedings. It can stop a sheriff sale a few hours before the house is scheduled to be auctioned or give homeowners more time to work on other solutions to foreclosure. If the owners have made a case that they deserve a second chance, the bank will also stop any further proceedings in the county courts.

So borrowers must avoid ignoring the frequent calls from the mortgage company or hiding in fear. Staying in contact with the bank throughout a financial hardship will be important if one method to save the home falls through at the last minute and the owners suddenly find they have little time to do anything. But ignoring the lender for months and then requesting more time a few days before the public auction has a far lesser chance of success.

Homeowners should evaluate their options to keep the house with a variety of sources, both public and private. With new government programs being legislated into existence by the day at both federal and local levels, there may be several assistance programs that can help stop foreclosure with public funds. Private sources include foreclosure specialists, other banks, the foreclosing lender, and private charities.

But as they are researching various solutions, homeowners should keep in mind how vulnerable they are to scam artists, which is one reason it is important to avoid signing over the deed to the house. This is possibly the most common characteristic of foreclosure scams that target the equity in a house or attempt to convince owners to pay the scammer rent instead of paying the mortgage company. Once borrowers have signed a quitclaim deed or otherwise transferred the property without also paying off the loan, they will have lost control of the house and will still be in foreclosure.

A final action that homeowners should avoid is moving out of the house prematurely. Even if they are scared of being evicted, it is better to stay in the house and consult with an expert who can explain how much time they still have left. But once the borrowers move out, the bank can have the property declared abandoned by the county and take possession much earlier. Any possessions left in the house are usually taken by the local government, and getting back into the house can be extremely difficult for the owners.

Some of the most common mistakes that homeowners make when facing foreclosure are ignoring the lender out of fear, signing over the deed in a desperate attempt to save the house, and moving out before they are required to do so. Doing any one of these may push the house further towards the point of it being impossible to halt the foreclosure in any reasonable manner. But borrowers who avoid taking these actions will be able to maximize their chances of avoiding eviction, while maintaining control over their properties.

One of the main problems with foreclosure is that the legal system the banks utilize to force homeowners out of their properties can seem intimidating to those unfamiliar with it. From the original complaint and summons to the eviction order delivered by the sheriff, the entire process is more a show of government force and alliance with financial interests than an attempt to secure justice for homeowners.

The first step in the legal foreclosure process is typically homeowners receiving the bank's complaint. This means they have a certain number of days from the date that they were served with the paperwork to serve their answer to the foreclosure complaint on the bank's attorneys and to file the answer with the court clerk's office.

But, it would not be a legal process if words like "complaint" and "answer" did not have confusing, uncommon meanings. Filing an answer does not just mean sending the attorney a letter explaining why the mortgage is behind -- it is a legal term expressing a certain way of addressing the lender's arguments in its complaint, stating legal defenses and references, and mentioning other positions in contrast to the bank's statements.

An "answer" is a legal term and indicates the homeowners opportunity to fight back against the bank's lawsuit against them. Borrowers can contest the lender's ability to sue for foreclosure in the first place, or attack any of the claims made by the lender in the original lawsuit documents, or point out that the bank has violated court rules or government predatory lending laws and regulations and the complaint is not valid.

Every answer should be unique, depending on the circumstances of the case, where homeowners go in answering the complaint is up to them, but it is usually a good idea to research the correct manner in formatting and filing an answer or consult with an attorney. The rules of procedure that govern such court proceedings are needlessly complex, with state rules, county rules, and individual court rules that must be adhered to, or else the judge can throw out or ignore any motions on technicalities.

The original foreclosure lawsuit paperwork may also have a court date on it somewhere; if not, the homeowners should the courts as soon as possible to find out when it may be held. But in many cases, courts usually do not immediately schedule court dates on an initial complaint. What usually happens is the homeowners file their answer within the required amount of time and then a court date is scheduled once the bank and borrowers have filed any other motions.

In the beginning, though, homeowners should be aware when they are served with the paperwork that they have just been thrown into a complex system of rules, regulations, and judicial discretions. It is almost impossible for any lender, no matter how high-priced or expert the law firm it hires, to follow every necessary clause in every law, any one violation of which may invalidate the entire foreclosure process or even the mortgage itself, depending on what mistakes were made at what time.

There are probably dozens (if not hundreds) of ways in which banks could be construed as to have broken laws, agency regulations, or even the courts rules. Whether any judge will listen to these arguments or simply ignore them in order to railroad homeowners depends on the specifics of the court proceedings, but every borrower should learn at least the basics of the legal process and do whatever they can to stop foreclosure or delay the auction as long as possible before final judgment is awarded to the mortgage company.

Finding out that you are renting a house that is facing foreclosure can be deeply worrisome. And the worst part is that there are so many questions that you may never receive a response to from your landlord and have to begin researching on your own.

How far along is the process? Has the house already been sold at sheriff sale? Who is the current owner of the property? Which bank is the foreclosing lender? Can you get more time to move out? Or has the landlord been working on a solution?

But the most common question that tenants seem to have when they discover their apartment or rental house is in foreclosure is if they still have to pay rent or not. Of course, this is a serious question, but it is more important to know who should be paid, rather than if a payment should me made at all.

The short answer is that you are still required to pay rent since you are still living in the property and using the space you are leasing from the current owners. You have a contractual obligation to pay rent in exchange for the living space, and foreclosure does not change that until ownership is transferred through a public property auction.

If you are concerned about the foreclosure, then you have two options, both of which you should work on. First you can either move out as soon as possible to avoid potentially being evicted later on, or, second, you should talk to the landlord about what he is doing about the situation and any possible solutions to foreclosure.

Some landlords are able to stop the foreclosure process before the house is auctioned off, and then you would just be behind on rent if you stopped paying now and they saved the home. You would probably end up losing your deposit in that case, since nonpayment is one reason you had to put down the deposit in the first place, and you may open yourself up to lawsuits for back rent payments.

You can also move out of the house claiming constructive eviction, which means the conditions made it so unlivable that there was no other choice than to break the lease and leave. If the owner does not give you your deposit back, you can try to sue for it later on. You would just have to convince the small claims court that a pending foreclosure was a reason to move out prematurely.

A final aspect of the process to be aware of is after the sheriff sale, the bank may become the owner of the property and rent payments will need to be made either to a trustee or the lender's attorneys. Most often, banks will attempt to evict anyone still living in the house after the auction, but if there is a chance to continue renting, it may be best to consider the circumstances.

But you do not just want to stop paying rent unless you have the correct information about the foreclosure proceedings, what the owner is doing about it, or a game plan for moving out and claiming constructive eviction. Otherwise, refusing to pay rent because of a pending foreclosure may have negative unintended consequences, depending on how the rest of the legal process plays out.

When homeowners consider filing bankruptcy to put a hold on the foreclosure process, most are attempting to save their homes and establish some sort of payment plan. Unfortunately, legal payment arrangements established in a Chapter 13 bankruptcy can often be too expensive for homeowners just recovering from a financial crisis. This is why filing Chapter 7 to eliminate the mortgage and other debt may be a better solution and provide better peace of mind for some borrowers unable to keep their homes.

Contrary to conventional wisdom, mortgage loans (firsts, seconds, HELOCs, and so forth) can be discharged in Chapter 7 bankruptcy proceedings so that homeowners no longer have to worry about paying an expensive loan when their income has dropped. But with a discharge, the owners will not be able to keep their house or remain living there for very long, as the bank will receive the collateral back as a result of the loan being eliminated. So there must be other reasons for owners to consider this tactic, since it does not actually save the house.

The main benefit of doing this is that homeowners are able to stop foreclosure from moving any further along in the legal process, meaning no more court documents, lawsuit paperwork, sheriff sale dates, or eviction hearings. Even if the borrowers move out of their house before the foreclosure process is completed, the courts will still move ahead with the necessary procedures to sell the house to satisfy the mortgage lien. Discharging the mortgage through bankruptcy ends the lawsuit immediately -- the mortgage company must cease all collection efforts on the loan, which will then disappear completely upon discharge.

Another important reason to consider filing Chapter 7 to eliminate the mortgage and move out of the house is the possibility of avoiding deficiency judgments after foreclosure. Although few banks sue their former clients again after the sheriff sale for the difference between what was owed and what the property sold for, it may be best just to discharge the mortgage and not worry about any further lawsuits regarding this property. With the credit crisis in full swing, some banks may get desperate enough for cash that they start attempting to collection on deficiencies from borrowers who obviously had problems paying their debts just a few months ago.

Bankruptcy is an important legal defense that homeowners have against unmanageable debt burdens and aggressive collections efforts, whether they are from credit cards, collection agencies, or mortgage companies. Collectors will never give up trying to go after a debt, and every day of the foreclosure process can be a nerve-wracking experience for owners unfamiliar with how it works and the time frames for each step. Although the social stigma of bankruptcy may be severe, many debtors will liberated and generally much feel better with a fresh start and no extra debt.

One concern homeowners may have is that they do not want a foreclosure and a bankruptcy to appear on their credit reports, which will virtually guarantee they do not receive a new loan for years. But if there is no way to save the home, using bankruptcy to stop foreclosure may be the best solution to get all of the bad over with at once. If the bank tries to go after a deficiency judgment months or a year after the sheriff sale, and borrowers are forced into bankruptcy anyway, they have merely prolonged the time it will take to repair their credit.

Discharging a mortgage in Chapter 7 bankruptcy is one of the lesser-discussed methods of avoiding foreclosure, potentially because it has some of the worst aspects of any solution. Homeowners neither save their home nor do they preserve much of their credit scores. But this tactic should be considered by debtors who know their financial conditions will not allow them to keep making the mortgage payment and who just want to escape from their large debts and get a fresh start in life.

The collapse of the housing market, despite impoverishing the middle class and wiping out trillions of dollars of home equity and turning suburbs into slums, will assuredly turn out to be a great profit-center for the wealthy. So many subdivided, built up resources just sitting empty throughout America while local governments are starved for property taxes present just too many deals for investors to pass up. And the vultures have begun circling.

The New York Post is reporting that an undisclosed sovereign wealth fund (SWF) is interested in making purchases throughout foreclosure ravaged areas. SWFs are large investment funds owned and administered by foreign governments. One of the more publicized SWFs of the recent past is the Abu Dhabi fund which, in late 2007, invested $7.5 billion to prop up the banking corporations Citigroup.

After the real estate markets were pumped full of easy money that created massive malinvestment and drove prices to unsustainable levels, the market was crashed by the predictable, inevitable fallout from the subprime crisis and the subsequent drying up of credit. In communities throughout the country, wealth was created out of thin air, then pushed towards the local giant corporations, which were the only businesses to move into the mass produced suburbs.

Fraudulent bank loans were fed into the housing market, and the borrowers put the money right back into the corporations that get their financing from the largest banks and then privatize government services and outsource local industry and commerce. The result is a lessening of local government power at a strengthening of the corporate model. In suburbs with little or no community involvement to begin with, the conditions were ripe for the draining of the entire area's wealth.

Now, the same SWFs, financial investment firms, and large banks that financed homebuilders, home buyers, and corporations to build up and move into communities to piratize the incomes and assets of the residents need a method of dumping their dollar investments before the currency is further debased. They no longer need dollars to lend to homeowners who will never pay back loans, and are now focusing on simply buying up the actual real estate assets, currently selling at 60-80 cents on the dollar in some areas.

Investment banks made billions of dollars made from fees generated by selling mortgages to poor people and then made even more billions securitizing these loans and dumping them off on local government pension funds and other unsuspecting end investors. Now, flush with cash just after preying on the housing market, they are ready to trade in their worthless dollars for the land and properties of the American middle class, which has been hit hardest by the bubble's collapse.

For anyone who was wondering what would happen to all of those abandoned foreclosure properties without people to live in them, the answer is starting to become clear. Banks and wealthy investors will be the new feudal masters of the suburbs, using cash from the profits from the housing bubble, plus a few free handouts from the federal government in the form of banking and Fannie/Freddie bailouts, plus the destruction of any competition from actual people who might live in these homes due to the credit crisis.

One story that is becoming more common during the foreclosure debacle is that of homeowners committing suicide to escape the financial difficulties. This is the wrong decision to make, but it is understandable due to the personal identification that people are conditioned to make with their credit scores. In fact, it is sad that so many people identify themselves with their economic conditions. But if people fall into foreclosure or bankruptcy, little about them personally or psychologically should be deeply affected.

Businesses and corporations that are experiencing the credit crunch and decreased consumer spending are filing bankruptcy and closing down stores every day at this point. Even some banks, due to their poor financial decisions, have failed and been taken over by the federal government. For such companies, declaring insolvency and seeking protection of the federal bankruptcy courts is completely a business decision based on changing economic conditions -- why should it be any different for the average person who loses a job or whose interest rates double?

But one story that never shows up in the media is CEOs of hundred million dollar companies committing suicide over corporate bankruptcy, because this story never happens. These managers do not personally identify with the companies they are running, and they know that shutting down, laying off hundreds of people, or declaring bankruptcy it is a decision made purely because of a downturn in the economy. Homeowners and borrowers have to look at it the same way if they lose a job or prices rise too high for them to keep on top of all of their bills; there is no shame in facing financial hardships.

But homeowners have an opportunity to mount a defense against banks crashing the economy, foreclosing on homes, and generally impoverishing the middle class. But this would involve one of the aspects of America that has essentially disappeared due to the atomization of the average family. Community ties have either been severed in old neighborhoods, or they were never established in new pump-and-dump suburbs. But every area hit hard by foreclosures would benefit from more community involvement in defending against these foreclosures due to fraudulent inducement of debt.

Neighbors who are not facing foreclosure (yet) are still running around in the hamster wheel, caught in the credit trap and too busy to help others standing up alone against the banks. Making it more difficult to create a movement against the stealing of homes is that only a few homeowners at a time will face an auction or eviction during any one week. And foreclosure victims facing the loss of their homes at the same time are too spread out over the country to make effective local stands.

But it is only by having large numbers of neighbors and community participants that the people can tell the banks and their government enforcers to leave them alone in their homes. A lot of this bad mortgage debt was fraudulent from beginning to end, and is written on void contracts because of the deception. Unless more people come together to force these predatory banks out of their cities, though, it will be one family at a time making a personal stand against increasingly powerful banks.

In defending against a foreclosure action, homeowners usually must make frequent attempts to contact their lender, an evil but necessary part of the process. This is typically the step in any plan to save a home that borrowers find the most difficulty with, not only due to their own embarrassment at falling behind, but also because of aggressive, rude, or incompetent customer service agents. But it is important to make the calls in order to work out a solution, and homeowners should record or document every time they contact their mortgage companies.

At the very minimum, borrowers should keep notes of every time they call the bank, starting with the time they call, the time they talk to someone live, that person's name, and what went on during the conversation. It is far too common for customer service agents to lose paperwork that homeowners fax, fail to write notes in the loan's file regarding a negotiated solution, or otherwise make the entire point of a homeowner's contact completely worthless. If the owners do not document the phone call and act on it, it will likely become just another failed attempt at working out a plan with no follow-up by either the borrowers or the lender.

Because most lenders have an automated system that informs homeowners that the phone call may be recorded, it is in the best interest of borrowers to keep their own copies. Although it is not legal in some states to fail to inform the other party they are being recorded, it is quite legal to record a phone call if both parties are aware of it. And with all banks informing their clients that they are being recorded, homeowners can make tapes of their contacts with the bank without fear of breaking the law.

One surprisingly effective tactic is, after a phone call is done, simply not to hang up right away and just be quiet and listen. Often, bank customer service reps will also fail to disconnect and begin talking to co-wowkers about how annoying borrowers are, or the fact that they have already decided they will not provide any help to work out a loan. This attitude by some loan workout reps should be a strong indication that the bank is in the practice of simply stringing along homeowners, giving them false hope until the bank can steal the home. But borrowers will not be aware of this tactic unless they hang on at the end of phone conversations for a few extra seconds when the customer service rep believes the call has ended.

Regardless of how the customer service agent wants information sent to the bank, homeowners need to follow every important phone call with a letter. Loan workout documents or short sale offers can be faxed to the bank, but it is likely the paperwork will never be received, get lost, or just be thrown on the pile of 800 other files the bank representative is working on. Sending a certified letter with return receipt requested will, if nothing else, show the courts or regulatory agencies that the borrowers made an attempt to work out a solution and the lender may be forcing a foreclosure by "losing" negotiation offers.

But homeowners also need to do everything they can to keep on top of the lender's requests for information. When the mortgage company requests a package of financial documents or a hardship letter, the borrowers should comply with the request as soon as possible -- usually no later than 24 hours after the phone call. Waiting an extra week to gather tax documents or acquire fresh paystubs will hurt more than help. But immediately sending a fax of the requested information, combined with a phone call to make sure the bank received the fax, as well as a mailed copy of the documents, should be enough to show that the owners have made every attempt to stop foreclosure and comply with the lender's requirements.

Keeping in close contact with a mortgage lender eat up as many resources as a part-time job, but homeowners who want to work with their banks need to put in much effort to negotiate a mortgage modification or other solution. Lenders have thousands of foreclosures to work with, and the most persistent, hardest-working borrowers will be the ones who receive a solution, while the less diligent will simply lose their homes. In every case of foreclosure, though, it is important for owners to maintain open lines of communication with the bank and document or record every conversation, and follow up by complying with the bank's requests and sending copies of every document via certified mail.

The credit crisis has begun to show us all just how many homeowners were taken advantage of during the real estate boom with creative financing vehicles like Option ARMs and subprime mortgages. And while servicing fraud has always been a part of the mortgage industry, more equity was created out of nothing during the bubble than in years past, which has made even more borrowers prime targets for financial terrorism on both the front end of the mortgage and during the period of repayment.

Predatory lending is often used to describe poor loan placement, deception in the terms of the agreement, shady brokers using blank documents and not making important disclosures, and other related scams. Many of these tactics are used to fraudulently induce buyers or current owners into taking out a loan that is not in their best interests and which they will most likely fail to repay. But the extra fees generated at the closing for the lenders make such practices attractive to banks and loan originators attempting to cash in before the loan goes bad.

For example, take the case of John and Mary, who wanted to use the equity built up in their house to pay off high credit card balances, replace an old car, and put some extra money in the bank. Despite the fact that their credit was not good, their mortgage broker Bill put them into a 90% financed Option ARM at 3% interest for the first five years. John and Mary were not told it was an adjustable rate mortgage -- Bill simply signed their names on the required disclosure. But that was perfectly alright with John and Mary, who had applied for a stated income loan and "rounded up" their monthly income an extra few thousand dollars.

At the closing the loan, John and Mary thought they had gotten a great deal on a low-interest mortgage. Little did they know that their minimum payment would not even cover the interest charge, and every payment they made would cause them to fall further behind, thereby eating up the remaining equity and resulting in a negative equity position. Like so many homeowners, though, they did not read their mortgage statements and would not have understood the numbers even if they had read them.

On the other hand, mortgage servicing fraud happens after the loan has been originated. The lender packages the mortgage with other similar debt products and sells this package to investors such as hedge funds or financial investment firms. The rights to collect the payments are sold to pension funds or mutual funds, while a servicing company is hired to administer the loan, do the accounting, receive the monthly payments, maximize profits and minimize losses on the debt products, and proceed with a foreclosure if the owners default.

The fraud comes in when borrowers are deliberately pushed towards foreclosure by the mortgage servicer. This may be a result of "accounting errors," forced insurance, "misplaced" or "lost" payments, or negative escrow balances that incur late fees and interest. In any event, the company increases junk charges in order to make it nearly impossible to stop foreclosure by paying back the loan, and the mortgage company ends up being able to sell the house on the open market after a sheriff sale for a price that far exceeds what they would have received if they had simply serviced the loan legitimately and collected payments over time.

So in our example above, after the first two years of making payments on their loan, John and Mary received a letter from their mortgage servicer threatening foreclosure because they were behind by three months. Knowing that they had not missed a single payment, Mary called the lender. After spending an hour and a half on hold, she was told by a customer service rep that they did not have qualifying homeowners insurance, so the lender had placed their own insurance on the house, at a high rate. Mary, of course, knew that they had property insurance and offered to fax proof to the mortgage servicer.

When proof of insurance was faxed, John and Mary thought the problem was taken care of, so little did they expect to be served by the county sheriff with foreclosure lawsuit papers a few weeks later. They immediately called the mortgage company, who informed them an hour later that they had never received the faxed insurance papers and gave the couple a new number to fax it to. John complied by faxing and getting a confirmation the paper went through, and called the next day to make sure. Imagine his surprise when the company said it had not received the fax and that the forced insurance would stay and the foreclosure continue.

By this time, thousands of dollars of extra fees for the placed insurance and lawsuit had been added to the loan, along with several miscellaneous corporate charges, escrow charges, and others. The servicer refused to explain any of these charges over the phone and would only fax payoff statements through their attorneys showing the total amount of the fees, not what they were actually related to. At this point, John and Mary stopped thinking a horrible mistake had been made and began to realize something much more sinister was going on with their loan and that they had become victims of a corrupt bank.

Although they had missed the time to file an answer to the foreclosure complaint, and a default judgment had been awarded to the bank, Mary went to the courthouse and demanded to speak with the judge. The judge listened to her, but refused to acknowledge any of the fraud, rules violations or mistakes the lender had committed, saying to Mary, "They have a judgment against you; you had time to file an answer just like anyone else. If you don't like it, you can appeal or hire an attorney." At this point, the couple realized the corruption of the bank had spread into the local government, as well.

With the sheriff sale fast approaching in a couple of months, John and Mary did all they could to borrow from family and save up enough to pay off the amount the servicer said they owed. But a month before the auction date, the family received its latest mortgage statement showing a doubling of their mortgage payment. The original Option ARM loan had reset to a higher interest rate, and because the loan was underwater, the payments were increased even more to start paying down the mortgage over the remaining term.

At this point, with their credit rating destroyed, the mortgage payment doubled even if they could save up enough to reinstate, and the house up for auction in a month, John and Mary threw in the towel. Although the loan originator and mortgage servicing company had made their thousands of dollars, and the family had never missed a legitimate payment, they felt there was little else they could do than move on, blaming themselves for the failure. Everyone, from the banks to the local government, it seemed, had decided they deserved to lose their home and suffer the effects of a foreclosure for the next decade of their lives.

How many more people like John and Mary will come out with similar stories of mortgage fraud from beginning to end, a fraud which they may have participated in but which only they have felt the negative consequences of. Accountability for the banks is a hollow catch phrase when they are receiving hundreds of billions of dollars in bailouts, while bankruptcy reform laws make it more difficult for homeowners to get out from under crushing debt burdens. And the government, in bed with the banks from the local levels to the heights of power in Washington, takes money away from the people to keep the fraudulent monetary system afloat for a few extra months.

Our mortgage and real estate industries are corrupt from top to bottom, from beginning to end, and the foreclosure crisis is just another way for the banks to impoverish ordinary people while enriching themselves. That they have the audacity to perpetuate such frauds on homeowners and then blame those same homeowners for the collapse is a signal of just how much more powerful banking interests are than the people. That elected officials go along with the charade by bailing out the banks and sticking people with the bill is even more reprehensible.

It must be noted that we are not giving advice on whether any particular property or borrower can avail themselves of the new FHA loans. For that, the borrower will have to have the situation underwritten by the FHA lender. These comments are generalities only, but bear upon a borrower's consideration of whether they have any real chance of obtaining such a loan.

This Act gives the FHA 300 billion dollars to be used between October of 2008 and September of 2011 to refinance certain loans made prior to January 1, 2008. It is intended to allow homeowners who cannot afford their present loans to refinance them through cooperating lenders and holders. This legislation has been heralded as a way for almost 400,000 homeowners to avoid foreclosure. Critics, however, have noted that the Act really will not help many who will be foreclosed upon. In truth, we believe that the Act will be of some assistance, but cannot help but comment that it, by its basic construct, is not really intended to help most of those in trouble.

To begin with, if one takes 300 billion dollars and divides it by 400,000 expected beneficiaries, that is an average loan size of $75,000 while the average mortgage in the United States is well in excess of $120,000. If that mortgage amount is used, the number of borrowers that can be helped is only 250,000. If there are another 2 million foreclosures over the next 3 years (which may be a low figure) that is less than 15%.

This legislation, in our opinion, was a compromise with powerful banking lobbies. In most markets values have depreciated over 25% over the past 2 years. In many markets that depreciation can be as large as 40%. As will be discussed, the FHA loans cannot be in excess of 90% of today's market value. Thus, in an average market, that means that the present lender would need to forgive almost a third of the loan amount. It has been our experience that, in terms of obtaining deeds in lieu of foreclosure or short sales, lenders are anything but keen to accept losses of that amount. Lenders are under absolutely no requirement of participating in the program at all, or, if so, to any extent. That is the inherent problem with the legislation and evidences the compromise reached.

We believe that it is prudent to assume that, where depreciation has been greatest; generally where foreclosures have been greatest, holders will be unwilling to accept this level of loss. Although one can argue that this loss is still better than what they would experience in a foreclosure, it does not take into account the fact that, in a foreclosure, in most instances, the holder can still pursue the borrower for a deficiency judgment.

Some would say that holders know that they almost can never recover those judgments, and will not try to collect upon them. But, lenders may still use them as leverage to obtain some amount, at some future time. Even if the borrower declares bankruptcy seeking a wage earners Chapter 13 plan, the holder will receive a portion of that deficiency amount. Only some borrowers can obtain a release through a Chapter 7 bankruptcy. In all other instances the holder will garnish wages or attach other assets to receive some amount of the deficiency. For this, and other reasons, lenders may take their chances in a sheriff's sale and simply foreclose.

Other proponents of the Act claim that lenders will be under enormous political pressure to allow FHA refinancing. Although only time will tell, we believe that lenders will largely "dig in their heels" when they think that they can obtain a better deal in a foreclosure.

That is the primary reason why this Act may not be beneficial to many homeowners.

Secondly, the qualifications for an FHA refinancing will disallow many to qualify.

1. The borrower must show that it cannot afford the payments today. Does that mean that, if they can get by on what is considered possible by the FHA, they do not qualify? Will the FHA assume that a family of four must live on $100 per week of groceries; or that they can sell their already financed automobile, or that they can take public transportation even when that is really not feasible? No one has those answers and our guess is that it will vary greatly and subjectively between one administrator and another.
2. The borrower must show that it presently has a ratio of mortgage related expenses to gross income of over 31%. That should not be much of a problem for most families in trouble, however, in more than a few instances, that ratio may be difficult to apply in circumstances where the borrower has variable income-for instance salespeople who have made better money in the past than they are able to make today, or in the future.
3. The borrower must be able to prove the ability to qualify for the new loan based on income that is verifiable through their tax return. While this may be fine for many homeowners, it is not the case for those whose loans were made based on "stated income" at the time of their present loan. This is where a lot of abuse took place and lenders simply "fudged" income numbers. For those in that situation, coming up with tax returns showing the amount of income today, will be very difficult.
4. If there is at present a second mortgage held by a holder other than the first mortgage, that second mortgage must be paid off. In so many instances, borrowers have second home equity or other loans with lenders other than that on the first mortgage. Almost no holder of that second mortgage will agree to simply let the borrower go without obtaining a good portion of that loan. For a huge majority of those with two mortgages, that virtually eliminates the possibility for an FHA loan under this Act.
5. The borrower must be able to put down approximately 3.2% of the new FHA loan (possibly more). Many borrowers are not in the position to do so. They may borrow from someone who is not a party to the transaction, but that loan must be entirely subordinate to the FHA mortgage, meaning that it may not be repaid before the FHA loan is. As these loans are 30 year fixed rate vehicles, that may be a long time.
6. The borrower will pay the FHA rate, considering their creditworthiness and assets. Although that rate may be 25 to 50 basis points (one one hundredth of a percent is a "basis point") less than a convention rate, that may not be the case given the bad credit of most people facing foreclosure. On top of that the borrower must pay an "insurance fee" of 1.5%. When you add that together, it may make the loan rate considerably higher than a conventional rate. Still, of course, the rate applies to a much lower principal balance, so it is still a "good deal". But, in terms of actual monthly payment, perhaps not as good as what may be obtained in a good mortgage modification.
7. If the borrower sells the home or refinances it over the five years after the FHA loan, the amount over the loan amount will be split between the FHA lender and the borrower at a rate starting at 90% to the lender and going down to 50% in year five. This is still, obviously, a good deal for the borrower.
8. The FHA program will only apply to the borrower's primary residence and not to any investment property.
9. The amount of the maximum loan is gauged to the marketplace in which the home is located which is good, in that, in high cost areas, the cap will be larger than in lesser cost areas; however, the cap in high cost areas, may still knock out many loans that are over the conventional limit for a GSE loan.

The borrower must recognize that there is a dilemma which is faced in relying upon the FHA program. From a pure negotiating standpoint, if the borrowers are dead-set upon obtaining the FHA loan, they may miss the opportunity of obtaining a loan modification which will keep them in their home. Some holders of the present loan may dismiss the FHA option out of hand. In that event the borrower must immediately move toward a modification. In order to push their qualification for the FHA loan, the borrowers may show that they cannot handle the present loan and detract from their ability to pay a modified loan. It is critical for a borrower to know exactly when to abandon the hope for the FHA loan and push for a modification. It is also necessary, in convincing the holder to look at the FHA loan, that they not "shoot themselves in the foot" and create a problem in asking for a modification. This is a balancing act that few borrowers and even credit counselors are able to do well.

Remember, the holder is going to look at all of its options. They can foreclose and go after the borrower for a deficiency judgment. They will weigh that against their cost of forcing a "short sale" where they may get more than the 90% of fair market value that the FHA loan provides. In fact, if a home is really worth fair market value, forcing the property to be listed for 90 or more days, may bring in a buyer that pays more to the lender. If they find a buyer for more, they will force the borrower to take the short sale. They will also look at the costs of a mortgage modification which, in many instances, is the best situation for them. That is why we believe that the FHA program will actually help borrowers to obtain a modification that will allow them to stay in the home, more often than the actual making of the FHA loan.

At the Debt Advocacy Center we believe that our aggressive pursuit of a lender in terms of weighing the cost of a contested foreclosure (based on facts which show them that the origination of the loan may have been done improperly) will give the borrower the greatest hope of obtaining the holder's consent to the FHA program, but, if that does not make sense to them, to allow the borrower to obtain a modification that will comfortably allow the borrower to stay in the home. It is necessary to weigh all of the pros and cons of both approaches, before deciding upon a strategy for negotiation.

Regardless of how reasonable a loan product homeowners may have been offered at the time of purchasing a house or refinancing, things can quickly go from bad to worse if a predatory mortgage servicing company is involved. These companies are hired by large financial investment banks to receive payments on mortgages and keep track of all of the fees, as well as proceed with a foreclosure if need be. However, their first priority is to maximize the profit of every loan they administer, which may lead to cases of corruption and fraud.

In some cases, a fraudulent company will begin adding junk fees, lose a few payments, or place forced insurance on a property even before the homeowners miss a monthly installment. When they do fall behind, though, the mortgage company will begin accelerating fees very swiftly and add even more charges that seem completely illogical. While the homeowners are facing a financial crisis, the acceleration of these fraudulent fees can ensure it costs them thousands of dollars more to stop foreclosure than it would have if the charges had not been added.

In fact, the presence of numerous junk fees before or during a foreclosure is one of the clearest indications of mortgage servicing fraud. Homeowners may make a payment on time, but it is credited to the account late, which incurs a late fee and extra interest. After a few months of this, the borrowers may be more than a month "behind" in payments as a result of the extra charges, even if they think they have made every payment before the due date.

Unfortunately, usually no amount of arguing with the servicing company results in a positive outcome. Getting a servicer to admit making such a mistake may reveal that this is a standard operating procedure, and these companies do not want to be caught in a court of law stealing homes to maximize profits. Typically, they will deny, threaten, or stonewall homeowners to avoid dealing directly with the charges on the loan.

Even more unfortunate is that many local court judges go along with the servicer, because the borrowers are behind in payments, after all. This is what makes the scam so devious -- the company will add thousands of dollars of fees, but not act on it until the borrowers miss a payment. When they fall behind a few months, the thousands of dollars of fees, plus interest, plus foreclosure costs will immediately make it prohibitively expensive to get back on track or qualify for a mortgage modification or other solution.

Making the playing field more uneven, the mortgage servicing companies have so many more financial resources than the average foreclosure victim and can hire high-priced local attorneys. The lawyers will do everything they can to pursue the foreclosure quickly and defend aggressively any claims of fraud or excessive fees. But it may only be in the courts that homeowners can stop the foreclosure process before their home is sold out from under them; the servicing companies will do everything possible to postpone serious solutions until they are able to steal the house.

To defend against such predatory servicing, homeowners should request that all fees be disclosed and clearly explained so they can verify what the fees are for and if they are even legal or owed. It may be better to hire an attorney to handle this challenge in court, but borrowers may be able to request this information from the company directly. Verbal requests will not do the trick and will be ignored for days while the servicer adds more fees and interest, and even a fax can be ignored for a few days; the best way to request this information would be in writing with certified mail.

The federal Real Estate and Settlement Procedures Act (RESPA) gives borrowers the right to request the disclosure of fees for their loan through a "Qualified Written Request." Even if homeowners may feel the fees they are paying are reasonable, as unlikely as this sounds, it makes for a better defense against foreclosure to request that the fees be clearly documented and verified. Lenders have to acknowledge the request within twenty days and either correct the account or give a statement explaining the fees within sixty days.

Most of the tactics used by companies engaging in mortgage servicing fraud have the end goal of increasing fees to make it nearly impossible for homeowners to save their properties from foreclosure. The servicer eats up the equity through junk fees, and then turns a profit when the house is sold on the market after a foreclosure sheriff sale. This results in higher, much quicker cash flow for the investors than if the loan was administered legitimately and paid off over time. Contesting the junk fees and making mortgage companies explain them adequately may be an effective, little known defense homeowners have against such mortgage misconduct.

With all of the finger-pointing and outcries about corrupt lenders and greedy mortgage brokers and real estate agents, every homeowner facing foreclosure may feel victimized. And certainly, there was a lot of deception and outright fraud in the mortgage markets during the boom years. But there are a few important signs to watch out for that may indicate the presence of a predatory mortgage company.

One of the clearest signs of predatory lending may be when homeowners or buyers are asked to sign documents that are completely blank or told to leave off the date. This gives criminals the opportunity to backdate, forward-date, or fill in incorrect information on a mortgage application or disclosure forms, keeping important notices from the borrowers. When the time comes to close the loan, the buyers may receive a completely different loan than they originally were sold, but which curiously has what appears to be their signatures on all the required documents.

Closely related is the issue of being asked to sign documents that have blatantly misleading or false information on them. Inflating a family's monthly income to qualify for a higher mortgage payment is nothing more than a set-up for failure down the road. Of course, some borrowers did this voluntarily and lied on their loan applications without the knowledge of their broker, but being asked by a loan originator to sign off on incorrect figures will lead to unintended consequences and possible foreclosure or prosecution for mortgage fraud.

Loan originators were also guilty during the bubble of putting homeowners in inappropriate loans with high interest rates or deadly interest rate adjustments. They persuaded the borrowers to go along with the loan in the hopes of refinancing in a year or two when their credit had improved. As is now known, however, most people did not qualify for the mortgages in the first place and were unable to qualify for a refinance once interest rates were raised and credit started becoming scarce. This helped lead directly to the foreclosure crisis now facing the economy, as subprime borrowers never became prime; they just became sub-subprime.

Also, it is vitally important that homeowners, at the time of closing, carefully read the sales agreement and loan documents, especially the sales contract and Truth in Lending disclosures. If there are any discrepancies, or the borrowers are being asked to sign for a loan that is different than the one they were promised, predatory lending may be being committed. In fact, borrowers should have copies of the closing documents at least 24 hours before the closing, and have reviewed them thoroughly and be ready to have any questions answered.

Realtors and mortgage brokers who relied on corrupt appraisers were also complicit in predatory mortgage schemes designed to boost their own profits at the expense of borrowers' abilities to pay their loans. Although homeowners want some appreciation of their properties, if they were originally sold a house at the top of an artificial market, an inflated appraisal may have been used. Home values should reflect the current market conditions -- not be inflated to the very highest amount that can be borrowed, putting the owners into a loan on a house that is not worth even close to what they pay for it.

Unfortunately, the amount of greed in the real estate markets facilitated by the Federal Reserve and the banks have led directly to a foreclosure crisis of epic proportions. So many first time buyers and uneducated owners were taken advantage of by mortgage lender misconduct and predatory loans that it is difficult to separate the unqualified borrowers who got in over their heads from the truly criminal mortgage companies that fraudulently induced this toxic debt. But if homeowners suspect they are a victim of mortgage fraud in any way, they should contact the appropriate regulatory agencies and make sure to fight their foreclosure in court for as long as it takes.