Over the next few weeks, this site will be bringing homeowners more information than any other on various methods to stop or delay a foreclosure using the local court system. The thought of going before a judge and fighting the bank can be quite distressing, but it is one of the most effective ways to gain more time and force the bank into a more reasonable settlement than taking the home.

From the initial lawsuit to a potential deficiency judgment and bankruptcy, homeowners are always threatened with legal actions being taken against them during a foreclosure. But most borrowers attempt to qualify for a loan modification, sell the house, refinance with a foreclosure lender, or simply give up before they are required to move out. And this is all because they do not know how the legal process works to be able to defend themselves against a lawsuit.

Banks, on the other hand, may know little more about the legal process than than their foreclosure victims, but they have the means (ironically enough, paid for by the interest generated from other families' mortgage loans) to hire attorneys who have purchased computer software that allows them to make nice-looking legal forms and motions. Banks and foreclosure attorneys never expect to be challenged in court because so few homeowners know how to do it; even if they hire their own attorney, it is usually just to force a settlement.

Thus, a homeowner who understands three things about the legal system can fight a bank for as long as it takes. First, the borrower just needs to be aware of how the court works, what format motions should be put in, and other procedural rules. Second, homeowners need to have an awareness of some of the ways banks violate various rules, such as sheriff sale notification rules or the Truth in Lending Act. And finally, the owner has to be able to explain these violations in language the courts will understand and be able to put all of the burden of proof back on the bank and its attorneys.

A new section of the website may be created to index all of the new information that will be available here on this blog, including example letters or motions. With old and new defenses to foreclosure being discovered every day and being proven effectual against lenders' baseless lawsuits, homeowners can add utilize a number of new tools to save their home. We plan to detail at least two dozen ways that a mortgage company fails to prove its case or can be challenged in court.

Every bailout the government has given to the banking system has been designed to stabilize the housing and stock markets, keep access to credit open, and keep people in their homes. But despite these stated goals, all that has happened is the banks are hoarding the free money, jobs are still being lost, and homeowners are going into foreclosure in record numbers.

Banks and the government worked together to enrich themselves through the real estate boom and turn communities into dumping grounds for easy loans. Now that the bubble has burst, banks and the government have been working together to ensure that only the people in those pump-and-dump communities feel the effects of the meltdown.

But it is not just that nothing is being done to help people stay in their homes. The government has come up with numerous programs ostensibly designed to help people stop foreclosure in certain instances and help borrowers work with lenders to modify mortgages.

An even worse problem, though, is that these programs take money from everyone else through inflation to help a very, very small number of homeowners. And if the programs are ineffective (which they have been so far), they may actually cause more people to face foreclosure.

All of this inflation where the government prints money and throws it at banks will also result in higher prices down the road. The banks are hoarding the money now in order to cover future losses they know are coming from other bad investments, but eventually they will begin making poor loans again, inflating another bubble before another collapse.

One argument that has been made is that it is far too difficult to throw small amounts of money at hundreds of thousands of homeowners to stabilize the system. So the government throws large amounts of money at a few small institutions, which is supposed to help everyone by maintaining faith and support of the financial system.

The problem is, these banks, once the government bails them out, have absolutely no incentive to work very hard with homeowners to save homes from foreclosure. With essentially free money, banks can sit back and do nothing, crying for more money when more people face foreclosure.

And this is exactly what it seems the banks are doing. Create a crisis, deliberately fail to respond to the fallout, cry for a government handout, use the bailout to act even lazier, not respond to further fallout, cry for more handouts, and so on.

Also, the few government programs designed to help homeowners work with their banks put restrictions on the lenders and require them to recognize losses on delinquent loans. So obviously, the banks are very concerned about having to admit to even more losses caused by bad mortgage loans, which might drive their stock prices down.

There is no real incentive for the lenders to take losses on loans and work with borrowers to restructure defaulted mortgages. In fact, there is a much larger payoff if the banks keep the foreclosures, do nothing to respond to them, and go to the government claiming a crisis that requires enormous amounts of taxpayer money to solve.

The bailout plans (especially the most recent $700 billion one) have required nothing from the banks other than that they be in serious trouble and need money. There are no restrictions and the banks can dump these bad loans directly onto the government, instead of having to work with homeowners.

The government has given the banks an incentive to keep making bad loans and then never address the problems caused by shoddy lending guidelines. The more people they foreclose on, the more free money they can cash in on from the bailout plans. So nothing will continue to be done to help homeowners stay in their homes.

The collapse of the housing market and financial industry has resulted in the normal amount of finger-pointing and searches for scapegoats, the latest of which have been the Community Reinvestment Act (CRA) and the Association of Community Organizations for Reform Now (ACORN). But the roles that have been played by these two acronyms have been far less damaging to the real estate market than that played by the major corporations and government institutions that manipulated markets and inflated the bubble in the first place.

Hundreds of local, regional, and national subprime mortgage lenders borrowed money from Wall Street investment firms to make loans to people buying or refinancing a house. When there were no borrowers left with good credit and stable income histories, these lenders gave mortgages to people with extremely poor credit, no credit, no income, and no assets. It was the easiest way to keep generating origination fees and the subprime industry did not have a stake in the eventual success or failure of the loans, as they were sold to Wall Street upon origination.

Wall Street investment firms like Bear Stearns, Lehman Brothers, and Merrill Lynch acted as middlemen in the process by providing subprime lenders with easy access to cash to make loans, then buying these loans from the lenders in order to securitize them for future sale as bonds. Investment companies charged investors to make these mortgage-backed securities, which investors thought were high-quality investments. Wall Street did not have a large stake in the eventual failure or success of the loans, except that the more loans they could securitize, the more they could sell to investors.

Bond insurers played a part by providing insurance on mortgage-backed securities, based on Wall Street firms' assurances that the mortgages were high quality when packaged together. A few might default, but not a large part of the entire group of loans. And anyway, with rising home values, the houses where families were unable to stop foreclosure by refinancing could be sold on the open market for more than the mortgage had been worth. So insurance companies charged a little bit to guarantee the securities, thereby making them look even safer. Insurers had a stake in the performance of the loans, but were convinced into believing that the bonds were of high enough quality to provide insurance on.

Rating agencies played their part by giving these bonds very high ratings, making them look to be very low risk, even though the bonds were promising to pay high interest rates. Typically, low risk means low return, but in the case of the subprime securities, low risk supposedly meant high returns. But the favorable ratings meant investors were willing to keep buying the securities. These agencies also had no stake in the success or failure of the loans, as they just provided their stamp of approval on them without ever having to own or invest in subprime mortgage securities.

The Federal Reserve lowered interest rates dramatically during the early 2000s, thereby making it much easier for banks to borrow and lend money. The greatest real estate bubble in history then formed, as anyone could get a loan at a low interest rate and no one had a stake in the eventual success or failure of the mortgages. They could just be securitized and sold to investors around the world or dumped on Fannie Mae and Freddie Mac and the toxic risk would be spread around the world. If the system collapsed, all of the players knew that the Fed and the government would step in to provide bailouts to prevent the recognition of the failure of the industry.

There is no doubt that ACORN, the Community Reinvestment Act, and other factors played a role in inflating the bubble and keeping housing prices rising far beyond sustainable levels, just as corrupt real estate brokers, mortgage brokers, and appraisers helped to overvalue properties in local areas. But all of these played merely supporting roles to the subprime lenders, Wall Street firms, bond insurers, ratings agencies, and the central bank that helped create and sustain the illusion that the housing market was in a phase of perpetual growth.

Many homeowners would be able to afford their mortgages if not for a temporary financial hardship or an inopportune interest rate reset. They are not facing a serious long term change in their income, but were only temporarily unable to make a payment. Interest rate resets on adjustable rate mortgages may be even more unfortunate, as it is clear so many borrowers did not understand and were not made aware of the fact that the cost of the mortgage would drastically increase a few years after they bought their home.

For families in this situation, it would seem easy enough to identify the goal that would allow them to keep their home; namely, they must lower their monthly mortgage payment. Of course, this is much easier said than done, but there are a number of routes that borrowers can take to try and obtain a more affordable payment, even if they have bad credit or they have recently changed jobs. While using a foreclosure lender is a viable option, in times of a credit crunch and lower property values, it may be wise to consider other solutions first.

Before they try anything else, all homeowners should call their lender and ask the loss mitigation department what is needed to qualify for a mortgage modification. Borrowers will probably have to send in a number of financial documents and fill out bank forms proving they can make a reasonable payment every month. This solution may significantly lower the payments but will typically not lower the total amount owed on the loan, as a modification is usually just about reducing the interest rate in order to make the monthly cost more affordable.

Borrowers may also want to consider the use of a foreclosure help company to do the services listed above. If they do not have the time to spend on hold with the bank for hours a day, then they might want to unload this part of the process to professionals. The owners can do pretty much everything else to qualify for a workout solution on their own, but banks currently have so many foreclosure cases that they need to be called almost everyday until the homeowners are given an answer to their application. If the borrowers can not make that call everyday, the should seriously consider paying someone else to do it on their behalf.

Another, more speculative, option is for homeowners to default on their loan completely and hope that the bank sells their mortgage to the government. The government will probably step in and negotiate the balance down and reduce the borrowers' monthly payment before selling the loan back to some other bank to collect the payments. Wall Street banks are being bailed out for hundreds of billions of dollars of foreclosure victims' money -- homeowners behind in payments might as well get in line to get a piece of their own money to save their homes.

Finally, as one last option to lower monthly payments dramatically, homeowners can try to fight the foreclosure in court for as long as they can get away with. It may take years for the legal process to be over, if borrowers answer the initial complaint and demand that the bank show proof that it can foreclose on the house and has been in compliance with all the applicable laws. There are so many regulations that banks will have violated some clause in a state or federal law, or lost the original mortgage note. In any case, some homeowners have lived mortgage free for nearly a decade while they file motions in court, wait for hearings, and file appeals at every step of the process. Even if they lose the house in the end, they will have a long period of time in which to save money and pay down other debt.

Families who experience a temporary setback in their income may find it almost impossible to get back on top of their mortgage payments, with little help offered from the mortgage company itself. The banks make it difficult to do so, as they begin accelerating fees and interest in an attempt to eat up as much equity from a house as possible, if it goes to a foreclosure sheriff sale. But homeowners do have options to lower their payment, either through modification of the loan, a potential government bailout, or fighting the lender in court, not to mention refinancing with a specialized foreclosure lender.

One of the sad facts about the experience many homeowners have in regards to foreclosure is that, no matter how hard they work at keeping on top of a repayment plan or modification agreement, they inevitably fall behind again and face foreclosure a second time. Unfortunately, this can make it all but impossible to work with the mortgage company for another agreement to prevent the loss of the house.

In fact, for homeowners facing a second foreclosure on their home in a short period of time, they will probably find it very difficult to convince the bank to modify their mortgage again. The lender will not be too interested in helping this type of borrower out of foreclosure again, since they fell behind on the original modification agreement or repayment plan.

When a bank grants a loan modification or similar workout agreement, it is making what it believes to be a reasonable offer for a second chance to help foreclosure victims get back on top of the mortgage. It is really a last ditch effort on the bank's part for it to give homeowners the benefit of the doubt that the hardship that caused them to miss payments in the first place was temporary.

But once the borrowers that received help have fallen behind again, the bank can see a pattern that the owners just may not be in a stable enough financial position to maintain an on-time house payment for the long term. And the mortgage company may not be willing to give up any more interest income by changing the terms of the mortgage to make it more affordable for the homeowners.

This is not to say getting another modification from the lender is impossible, as it is not and has been done before in similar situations to this. But homeowners who have fallen behind in one plan must be prepared to work a little harder this time in convincing the bank that whatever caused them to fall into foreclosure was only a temporary setback. A well written, detailed hardship letter will be important for this.

Also, it would be a good idea for the borrowers to save up some money to make a large payment to the bank to start the plan, and make sure their personal finances are in as good of shape as they can make them right now. That means no frivolously spent money at for clothing or online music stores, especially as the bank will be asking for bank statements to verify the borrowers have not just been blowing all of their money every month instead of making the mortgage payment.

One thing worth considering for homeowners who have fallen into foreclosure twice is if the house is even worth keeping at all. And if they decide can not afford the house anymore, it would be better to focus their efforts on dragging out the foreclosure process in the court system for as long as possible. That will give the homeowners an opportunity to save up extra money and pay down any other debt to make the transition from one house into another a lot easier.

For many reasons, mortgage companies are unwilling to provide much assistance to homeowners to stop foreclosure a second time on a property. Homeowners should keep this in mind when agreeing to a modification or forbearance agreement, as their failure on the plan would make it much more difficult to qualify for any other workout solution. Although it can be done, it is not easy to qualify for, and may be much easier to seek out other options to save the house or decide to sell.

Although the sheriff sale of a property is not always the end of the line in the foreclosure process, homeowners should do what they can to have the auction postponed. Even up to the day before the sale, there are a few different ways that they could still try and stop the county property auction. But it would be a good idea to have some sort of solution worked out that will let the borrowers keep the home or sell it quickly, because most of these ideas only postpone the auction for a short period of time. They do not stop it entirely, as that is up to the owners themselves.

First, borrowers can simply call up the foreclosing bank and ask the customer service representative to postpone the sale because they are working on some plan to save the house. Many people would probably be surprised at how easily most banks will agree to hold off on the auction and give property owners an extra month to put together a long term plan to keep the house. Obviously, homeowners should have some solution being worked on and submit written proof to the lender, but the bank can stop a sale at any time, even a few hours before a home is scheduled to be sold.

Second, borrowers in foreclosure can try and work in the local court system for a better solution. If the house is scheduled for a sheriff sale at all, the mortgage company got a foreclosure judgment against the owners and the house is being sold to satisfy that judgment. But foreclosure victims can always hire an attorney to help them reverse the judge's decision or appeal it to a higher court if the bank violated other laws and procedural rules in getting the judgment in the first place.

Third, hiring a personal bankruptcy lawyer and filing Chapter 7 or 13 will immediately halt a sheriff sale. The bank will not be able to pursue collection activities for as long as the house is in bankruptcy, which may give the owners the extra time necessary to put together another plan. But borrowers should not file bankruptcy the day before or the day of the auction, because the sale will probably go through and then have to be reversed later on, which can be quite difficult.

Chapter 13 bankruptcy will result in homeowners being given a legal payment plan to get back on track with their mortgage and other debts. The court will expect them to pay the regular monthly payments plus a portion of what they have fallen behind. For many homeowners, this can be prohibitively expensive, so they should either make absolutely sure they can meet the requirements or have a longer-term solution in mind that can be worked on almost immediately and will result in more manageable payments. But bankruptcy can give owners enough breathing room to apply for a foreclosure loan or find someone to purchase at a short sale, among other potential options.

In many cases, having a sheriff sale scheduled indicates a critical point in the foreclosure process, as legal ownership of the property will be transferred to the high bidder at auction. Although this may not be the end of the road, depending on state foreclosure laws, homeowners should do what they can to postpone this date if they are attempting to find a longer term plan to stop foreclosure. Asking the bank to postpone, defending the case in court, and filing bankruptcy as a last resort can all help borrowers stop a sale and give them extra time to find better solutions.

The most effective way to rob a bank is to own one. Mobsters, white collar criminals, and brokers of every kind learned this during the 1980s, when the Savings & Loan industry was largely deregulated with federal insurance against loss of deposits.

Upon passage of the bill deregulating the S&L industry, criminals moved in immediately to take advantage of the one regulation left: federal deposit insurance of up to $100,000 per account. Money began to flow from New York investment firms into local thrifts that could pay high interest rates.

With hundreds of millions of dollars in deposits being poured into Savings & Loan institutions, thrifts padded their balance sheets with reserves that could be loaned out. No loan was too big, no real estate project too overvalued, no excuse for personal profit at the expense of the business too egregious.

But just as with the subprime mortgage industry, no one had an interest in the success or failure of a particular loan. Banks gave mortgages, personal loans, and lines of credit to cronies who would never be able to pay them back, and the amount of money stolen from thrifts threatened the whole industry.

Relatively little was ever recovered from the gangsters and criminals who looted the thrifts for over half a decade, as most presidents and recipients of loans had moved the money offshore. Even when government agencies attempted to go after stolen assets, the thieves usually just declared bankruptcy and made off with their fraudulent gains.

Upon the inauguration of President George H. W. Bush in 1989, the S&L crisis had to be addressed. Hundreds of thrifts had failed with thousands more at risk of failure, and politicians, businessmen, and regulators were implicated in the covering up of the scandal.

The bill that was passed and signed into law was the Financial Institutions Reform, Recovery, and Enforcement Act, which re-regulated much of the S&L industry. But most importantly, and most relevant to the subprime mortgage meltdown, the Act created a huge new bureaucracy to sell the assets of insolvent thrifts.

Part of this bureaucracy was the Resolution Trust Corporation (RTC), similar in many aspects to the Troubled Assets Relief Program (TARP), designed to invest taxpayer money in insolvent mortgage securities. The RTC was expected to handle nearly 300,000 properties (many of which had been overvalued to begin with) and $400 billion in failed S&L assets (including loans which were taken out never intending to be paid back).

While the RTC took over nearly half a trillion dollars in toxic loans, bad mortgages, junk bonds, unfinished condo and development projects, and undeveloped land, the program became another excuse for the same people who had looted the industry to begin with to launder their money back into these same devalued assets.

Criminals who had received huge loans from S&Ls on overvalued properties pocketed the difference, usually with offshore bank accounts that were never confiscated by the government. When the RTC took over the assets of these failed S&Ls, the government wanted to liquidate the assets for whatever it could get.

The looters of the thrifts, then, were able to use the dirty money they had obtained by defaulting on S&L loans to purchase insolvent S&L assets. In fact, the Resolution Trust Corporation did not even ask questions about buyers if cash was offered.

Thus, as Stephen Pizzo, Mary Fricker, and Paul Muolo conclude in their 1991 book Inside Job: The Looting of America's Saving & Loans, "Clearly, the RTC was offering a way not only to repatriate their offshore money but to parlay it into further gain as they bought government-owned assets at bargain basement prices."

The RTC used taxpayer money to clean up failed thrifts and then, instead of prosecuting the people responsible for bankrupting the industry, rewarded them by allowing the criminals to use their stolen money to buy back assets they had helped inflate at depressed prices. Also with the RTC throwing hundreds of thousands of properties on the market at once, real estate prices could not help but drop, making the deals even better.

And now, with the TARP beginning to ramp up its activities, the government will be doing essentially the same thing: using taxpayer money to buy inflated securities at higher prices and then sell them later on. Officials state that the government may actually make money from the program, but it is difficult to see how currently troubled assets will be more valuable than future worthless assets as the economy continues to deteriorate.

The parallels between the current housing market bust and the Savings & Loan crisis of the late 1980s are almost too numerous to count: small lending institutions flooded with federally-insured Wall Street money, rampant overvaluations and looting, a Bush in the White House, and the government finally taking over the failed assets of a bankrupted industry.

One of the most important concepts homeowners in foreclosure should keep in mind is that they should never give up on their home unless they are good and ready to move out. If they have any desire to keep the house, then they should continue to pursue different solutions. But moving out prematurely and without examining every option available is always a mistake.

Unfortunately, it seems that many homeowners are just unaware of exactly what options they may have left, and what to do if they are turned down for one plan or another. Foreclosure assistance companies will recommend their one or two programs, while the bank may offer only one solution, and homeowners assume they do not qualify for a refinance. Being turned down, though, is not the end of the road, as other solutions should be immediately considered.

Possibly the first option that many homeowners consider when they are beginning to run into financial problems is to refinance their debt. If they have already begun missing mortgage, car, or credit card payments, however, their credit may no longer allow them to obtain a standard loan to reorganize their bills. Lenders are no longer providing any credit to people without perfect payment histories and verifiable income, which may leave many borrowers out of the traditional lending system.

But depending on the circumstances, hard money lenders and foreclosure loan companies are still able to provide solutions. Although the requirements may be strict for these types of mortgages, homeowners can use them to build a bridge from a short term financial crisis to a longer term recovery. Foreclosure refinancing has typically been offered by companies that are far more interested in the viability of the loan, rather than just making money on fees.

With the real estate market in turmoil in much of the country, foreclosure lenders may be difficult to obtain a loan from. Homeowners should also work directly with their current bank for various solutions. Although many homeowners consider a mortgage modification their first choice, banks may not be willing to provide this to any but the most qualified candidates.

In fact, many homeowners who have fallen behind in their monthly payment will be offered a repayment plan before a loan modification. This is because banks do not want to lower the interest rate on a mortgage because it cuts into its long term profits. While such a forbearance agreement may not be as beneficial as modifying the mortgage, homeowners should consider entering into an agreement, even if it is just to buy more time to work on a different solution.

Speaking of buying time, filing bankruptcy to stop foreclosure is also an option that many homeowners consider a last-resort choice. But if a sheriff sale is coming up and the bank is unwilling to postpone the auction, this option will put the process on hold immediately. The bank is unable to pursue any collection activities on a loan in bankruptcy, and the process may take at least a couple of months to be resolved, giving borrowers extra time to work out a better, more affordable solution.

It should go without saying that borrowers may wish to consult with a personal bankruptcy lawyer before going ahead and filing. A competent attorney can recommend which type of bankruptcy is most appropriate, as well as making sure forms are filled out correctly and completely. While it is a relatively simple legal matter, filing either Chapter 7 or Chapter 13 should be done with at least an initial consultation with an attorney.

There are numerous ways that homeowners may have available to them to stop foreclosure before a house is lost, and no borrower should just try one method and give up if it does not work. Even disposing of a property that can not be saved may be done in a number of different manners, some of which may help prevent damage to a credit score or allow owners to leave without worry of a deficiency judgment.

When borrowers are trying to save a home from foreclosure, circumstances almost require a customized solution. This is why so many options exist, because not every method will apply in ever situation, and one viable solution may be more affordable than another for a specific family. The important point is to begin researching different ways to stop foreclosure as soon as possible, and not give up even if one or another does not work out.

Numerous commenters have pointed out similarities between the Savings and Loan crisis of the late 1980s and the recent collapse of the subprime mortgage market. Greed, corruption, fraud, Wall Street money, deregulation, political manipulations: all are blamed for both crises. But the real story is that of the government specifically setting up an industry to fail, and pumping that market full of cheap, easy money before the inevitable collapse.

Under the Garn-St. Germain Act of 1982, interest rate and investment aspects of the Savings & Loan industry were largely deregulated, but federal insurance regulations on deposits held at S&Ls were increased. The limit was raised from $40,000 per account to $100,000. Also, the Federal Savings and Loan Insurance Corporation (FSLIC) was granted "the full faith and credit of the US government," meaning that the federal government would guarantee deposits held in institutions with FSLIC insurance.

Immediately, money began flooding into regional thrifts from Wall Street investment firms through deposit brokers, who located S&Ls paying the highest interest rates and poured $100,000 deposits into those banks. These were all accounts of no greater value than $100,000, making them completely insured in the event an S&L failed.

The large amount of money flowing into the regional thrifts from Wall Street firms like Merrill Lynch allowed the smaller banks to boost their reserves and make increasingly larger loans. Loans were made on bad real estate deals using inflated appraisals, directly to friends, family, and cronys, condominium development projects, commercial real estate developments, casinos, jets, and so on. Huge bonuses and salaries were paid out to bank presidents and everyone else involved in the scams.

There was even a forerunner to the securitization process that took hold throughout the subprime mess. Participation deals allowed thrifts to spread their loan default risk to other banks by selling a portion of their loan portfolios to other S&Ls. This also allowed thrifts to remove delinquent loans from their balance sheets for just long enough for the regulators to miss them, at which point they bought back the toxic loans.

The bubble and inevitable collapse of the industry was set up by the Reagan-Bush administration and the Congress removing lending and interest rate restrictions on the S&L industry and increasing regulations on federal deposit insurance in the event of a failure. So it is a mistake to blame the crisis on deregulation when the most important regulation was actually increased.

The government removed some regulations while it simultaneously increased regulations to protect depositors against failure. But this was just an invitation for criminals to take advantage of the insurance limits, not a problem with deregulation or the free market. Greed and corruption certainly existed, but they would not have had such fertile ground to grow in the absence of federal protection against failure.

In the early 1990s, the government established the Resolution Trust Company (RTC) to buy up the inflated assets of failed S&Ls and sell them for whatever they were worth. This resembles the current Treasury Department Troubled Assets Relief Program (TARP) that will be used to buy up inflated credit securities and sell them for whatever they are worth. Again, another regulation against failure will allow banks, after pumping an industry to create a bubble, to confiscate any remaining assets for cheap.

The 1990s was also the decade where the banking system learned that, no matter how poorly their domestic or foreign lending decisions were, the US federal government would bail them out. All they had to do was pump a market or country full of cheap money, then remove the easy profits at the top of the bubble, then get back in during the collapse when prices fell.

Of course, the "collapse" of a manipulated market bubble was summarily declared a "crisis" in the "free market," and a taxpayer-funded bailout was required to prevent a credit crunch. This happened during the Mexican peso crisis, South East Asia crisis, and collapse of hedge fund LTCM, to name a few. Every time there was a problem, the Federal Reserve turned on the money spigots, lowered interest rates and kept them low, and investment firms were bought or bailed out to avoid actual failure.

The internet stock and 9/11 recession were classic examples of this, as the Fed lowered interest rates beyond all reasonable levels and kept them low while the housing market was pumped full of easy money. The artificially low rates turned a housing boom into an unsustainable bubble, while no one had a stake in the failure or success of any particular borrower. Lending standards disappeared.

Mortgage originators were only too happy to make loans to people who had no money or income that could be used to pay back the loan. Wall Street financial institutions enjoyed the profits they made from funding these types of loans. Investors around the world were only too happy to buy the AAA-rated securities that were created from these subprime mortgages. It was another participation scheme, but on a global level.

When rates began to rise, and people began taking a look at who actually received subprime mortgages, the industry collapsed virtually overnight. But subprime lenders were simply conduits for money from Wall Street. Once the large investment firms started to feel the pain of the collapse, an emergency was declared in the markets. The Fed and Congress reacted immediately and allowed the firms to loot the economy with bailout after bailout, new Fed auction window after new Fed auction window, and federally guaranteed loan after federally guaranteed loan.

The only hope that legislators still have is for another bubble to form or the complete looting of the American economy. With no boom in any market sector right now, it is difficult for the manipulators to create stability and upward momentum for the stock market. Thus, it should be no surprise that Congress went back to the S&L toolbox and has been attempting to prime the pump for another financial bubble to form.

Just a few weeks ago, with the passage of the $700 billion bailout plan that resembles the old S&L Resolution Trust Company, the limits on federal deposit insurance were raised from $100,000 per account to $250,000. Is Congress desperately trying to inflate a new bubble fueled by corruption, greed, and a federal backstop against failure?

Homeowners facing foreclosure may feel as if they have very few options to save a home, especially if they have already tried to refinance and work with the bank to lower their payments. Unfortunately, these two common solutions are not easy to qualify for, and negotiating with a large mortgage company requires more than just submitting a few income documents. Borrowers, after making a few attempts to stave off foreclosure on their own, typically either turn to government solutions for help, or begin interviewing private assistance companies.

In any case of foreclosure, though, it is worth examining the pros and cons of seeking government help or using the free market to provide solutions. While government can provide subsidized assistance through voluntary programs and free advice hotlines and the like, these programs have little accountability and can move slowly. Private companies who have contractual obligations to clients, however, must provide a good service or run the risk of complaint or regulatory actions, but there is also a greater danger for fly-by-night scam artists.

Government solutions are funded by every citizen through their taxes or the Federal Reserve printing the money for the program into existence. This makes it cheaper for homeowners to request assistance from these programs, but there is far less accountability for the government to provide any meaningful results. In fact, because bureaucrats who run the program are not dependent on the success or failure of the citizens to save their homes from foreclosure, there is little incentive to provide excellent service to a homeowner.

The main benefit to using the government to help is that homeowners are aware up front that they can expect little in the way of service and that, even if they get less than promised, they have little recourse to hold the government accountable. After all, borrowers should not expect too much from a "free" program. But they also do not have to be on the lookout for scams to steal their money in up front fees for services never performed or target the equity they have in their homes. Government programs, then, are typically designed for people who have little expectation to save their house and who do not trust their own judgment to avoid foreclosure scams.

Private solutions, on the other hand, are paid for by the homeowners requesting the help. Borrowers must have some resources available to begin a process with private companies, but they usually enter into an agreement detailing exactly what to expect from the company. Everyone involved in the process, from the owner of the company down to the customer service representative, knows that their income depends on their ability to make a positive impact in the homeowners' lives and help them stop foreclosure.

The benefits to using a reputable private assistance company to save a home include the fact that borrowers are paying for specific services, and the agreement they enter into with the company details what each party can expect of the other. In the event of a failure, homeowners can hold the private company accountable and sue for relief or file complaints with regulatory agencies. This potential for scams is the most important drawback to trusting in private companies, though, but homeowners should not give their money away to anyone without doing a thorough background check and evaluation of the company's reputation.

Homeowners should consider using both government programs and private foreclosure help companies when they are facing a foreclosure. While government can provide advice and sources of help, they have little stake in the eventual outcome of the situation. Private companies, on the other hand, by the fact that they are paid for their services, do run the risk of scamming borrowers, but they can also be held more accountable to clients. Thus, borrowers should use both sources, with government providing some free advice and the free market providing actual work and solutions to foreclosure that can be measured.

For over two decades now, the banking system and financial investment companies have known that they can get away with looting the American people and foreigners throughout the world. Any time (every time) something goes wrong and the banks begin to lose money, typically after making obscenely unethical profits by partnering with governments, government steps in again to rescue the banks and prevent failure.

But every time that the government steps in to rescue banks from poor foreign or domestic investments, it is the people who pay for these mistakes while bankers learn how to improve their abilities to loot the taxpayer. Since at least the 1980s, banks have been practicing how to inflate bubbles, create malinvestment, take the easy profits, lose a little bit of money, and threaten to freeze credit markets until they are bailed out.

The Savings & Loan crisis of the mid to late 1980s was arguably a dress rehearsal for the subprime market crash. Typically, the failure of the S&L industry is attributed to the deregulation that began at the federal level and continued at various state levels. But the most important regulation increased; namely, the government insurance on deposited funds in thrifts was raised.

This ensured that depositors, both big and small, would be protected by the government if the S&L failed. Thus, thrifts began to expand rapidly using large deposits from Wall Street investment firms that they obtained through deposit brokers who promised large accounts for the highest interest rates they could obtain from the S&Ls.

Of course, this was an invitation to disaster, as financial firms only wanted the highest interest rates they could receive. Deposit brokers knew that the funds were federally insured and could put them into any thrift that would promise a high rate of return. What the S&L did with the money after that was the decision of the bank president and the directors.

Unfortunately, the decision often involved corruption, fraud, and sweetheart real estate deals (usually based on fraudulently appraised properties) that never were never developed. Small time criminals and even the Mafia became involved in numerous S&Ls, taking in brokered deposits in order to increase reserves, then making huge loans that were never paid back. If the mob was able to take over bank, it could raid it entirely (in a so-called "bust-out"); if not, it just took whatever was offered and then moved onto the next bank.

Once the thrift had been thoroughly looted, it was left to fail. The regulatory companies often stepped into the picture to declare the S&L insolvent, and then had to pay out on the insured deposits, costing the people hundreds of millions of dollars. Since the deposits were insured, the S&Ls were able to attract huge deposit accounts and then create fraudulent loans on these accounts, trusting that the feds would stick the people with the bills.

Although the small banks were allowed to fail in large numbers, the financial power centers that had initially gathered the large deposit accounts were quite protected by the federal government. They knew not to invest more than the highest insured amount in any one account, so virtually all of their money was recovered, even as they provided the easy money fuel that the criminals throughout the country used to loot the small banks.

Deregulation was not the root cause of the problem, although the S&L industry was deregulated in 1982 with the passage of the Garn-St. Germain Act. Insurance was increased from $40,000 per account to $100,000 per account, and the agency in charge of thrifts, the Federal Savings and Loan Insurance Corporation (FSLIC), was given the "full faith and credit of the U.S. government." Increasing existing regulations was the problem and it proved to be an invitation to mobsters and criminals to loot the industry.

The result of the so-called deregulation with a federal backstop against failure was that, by the end of 1988, just six years after the first legislation was passed, nearly 600 thrifts had gone out of business. Over 800 more were on life support by the feds, and the cost was estimated at $3,000-$5,000 per taxpayer over three decades.

With the current financial crisis, the blame is once again being given to deregulation of the credit market, allowing subprime mortgages to increase beyond any reasonable limit. But banks had learned from the S&L scandal and ensuing crises during the 1990s that large institutions would not be allowed to lose money, and they took advantage of this to begin pumping the housing market full of cheap money.

The Federal Reserve obliged by lowering interest rates and keeping them artificially low during the early 2000s, while Government Sponsored Enterprises like Fannie Mae and Freddie Mac bought up and guaranteed mortgage loans. Fraudulent appraisals and fly-by-night mortgage brokerages made a comeback and the subprime mortgage industry grew exponentially.

With house prices rising to stratospheric levels, it was doubtful that anyone with any reason or common sense left could not have predicted an end to the growth. Making money to people who had no jobs or money was never a viable business plan, but the large banks were able to generate fee after charge after commission by providing the money for these loans, buying them, securitizing them, and selling bonds.

When home values began to stagnate or fall, the subprime lending industry collapsed virtually overnight. But again, the feds would not allow the banking industry itself to feel the pain of well-earned failure, as it provided one new auction window after another and began injecting hundreds of billions of dollars into the banks.

Now the Congress has passed its latest $700 billion bailout and will be investing directly in banks. So far, this has not prevented every insolvent bank or financial institution from failing, but it has given the banks an incentive not to work with clients and victims to repair some of the poor loans, instead hoping for a larger federal bailout the more they are in trouble.

Homeowners get foreclosed on, while banks get to keep taxpayer money as well as the properties of former borrowers. There has been nothing to keep the banks from inflating another bubble and relying on federal insurance to bail them out, just as they did during the S&L crisis when government, the banks, and the mob worked together to take advantage of the FSLIC and pump and dump small thrifts.

In fact, the FDIC insurance limit has been more than doubled from $100,000 to $250,000 due to the bailout package. Although this may protect some clients from losses, most small clients of banks do not have any savings, let alone $100,000 or more. Raising the limit is another invitation to fraud, abuse, and scams designed to loot the federal insurance fund, and this is what will likely result from the bailout.

There is little that any new package of regulations can do to help repair the financial markets, but every new piece of legislation invites more criminals to exploit loopholes and grab a piece of the federal budget and insurance funds. The busting out of the S&L industry during the 1980s was repeated during the subprime mortgage crisis, and Congress is now doing everything in its power to inflate a similar bubble.

When the only regulation that remains is federal insurance against failure, then failure is invited and even encouraged. Raise the insurance limit and ensure even greater failures; invite even greater scams to exploit those limits.

Thus, is seems that only two possibilities exist to explain the actions of Congress in bailing out the banking system again. Either politicians do not learn even from recent history, and their ignorance requires their removal from office; or they are working with the scammers in banking and the criminal world to inflate these bubbles at the expense of the people, and their corruption requires their removal from office.

Homeowners facing foreclosure are often concerned that the auction of their property will not be the end of their financial and legal worries. The threat of a deficiency judgment being initiated by the lender after the sheriff sale is always being raised by foreclosure consultants, attorneys, and representatives of the bank trying to wring more money out of borrowers. But finding actual cases of deficiency judgments against the average homeowner can be extremely difficult.

Is this an indication that banks are not pursuing deficiency judgments, or is it simply that these types of lawsuits are so rarely mentioned? Finding actual statistics relating to this type of lawsuit is difficult, and proving that they are rare can be even more trying, as it is nearly impossible to prove a negative. The absence of judgments against homeowners does not mean that they are never brought; after all, maybe every foreclosure victim defends the case and wins. Or these lawsuits are just rarely talked about. Or maybe former homeowners have deficiency judgments against them but, since they moved out of the house where paperwork was served, they are not even aware of it.

So finding evidence of deficiency judgments after foreclosure is not easy. Not for me, and seemingly not for other researchers online. Frank Llosa from FranklyRealty.com also wonders where these lawsuits are and comes to some of the same conclusions as we have, although he approaches it from the angle of banks bidding on properties at auction for the total amount due on the loan, thereby eliminating the possibility of a deficiency: "Why would they take over the property at $200,000 OVER what is it worth and let the previous owner be releaved [sic] from further obligations?”¹

He suspects that the missing lawsuits may be an indication of the fact that foreclosing lenders, “figure it is a waste of time and effort for the banks to go after the homeowner since they are broke."¹ This is much the same seemingly reasonable solution that I have raised before; after all, why would a lender, who has been thus far unable to collect on a foreclosure judgment, spend more time and money pursuing deficiency judgments against former clients?

The Florida Asset Protection Blog also mentions the possibility of deficiency judgments in cases where a second mortgage is present, but admits no personal experience with such lawsuits: "I have not seen any case to date where a first or a second mortgage lender has sued the homeowner personally."² Same here, and these deficiency judgment laws, in the states and under the conditions in which they are allowed, have thus far proven to be unused weapons, similar in volume of enforcement to jaywalking violations.

Taking a look through actions in the local courthouse is also a bit of a wild goose chase, as there are far more foreclosures than deficiency judgments. In fact, there are no deficiency judgment cases that I could locate listed in my local court system. And this is in a state with a quick process and such lawsuits are allowed after the sheriff sale. Dozens of foreclosure cases, both open and closed, are listed, but no deficiency judgment cases involving the same defendants as the foreclosure cases in any of the listings I could find.

And online, instances of this type of lawsuit can most often be found in estate cases and auto loan repossessions, but not real estate foreclosures. Of course, this makes more sense, since someone who loses a car can still be served with lawsuit paperwork at a current address, car loan outlets have more access to local courts, and the small amount of an auto loan deficiency may be reasonably expected to be paid back.

Since it seems that deficiency judgments during foreclosure are quite rare, why are lenders not pursuing them right now? As has been discussed here before, it is usually just not worth the bank's time to sue people who admittedly have little money. About.com states that, "In many cases, your lender will not go to the trouble. Legal action is expensive and time consuming, and people who just suffered a foreclosure often don't have the assets or income needed to satisfy a deficiency judgment."³ People with no job, assets, or not enough income may also be “judgment proof,” meaning that, even if the bank got the deficiency judgment, it could not be enforced or collected.

And when families are made homeless because of the actions of the bank, it may be difficult to get a legitimate judgment against people who can not be reasonably located to be served with court documents. Few former homeowners leave a forwarding address when the move out of a property before eviction, being completely aware of the fact that their lives would be much simpler without further correspondence from the mortgage company. Since the bank suing for the deficiency is obviously also responsible for the fact that the defendants may not have a current address, former homeowners later claiming the lawsuit was never properly served is not a difficult argument to make.

Also, an important point for homeowners to remember is that, if they put down less than 20% of the purchase price, they are probably paying Private Mortgage Insurance (PMI). Even though the homeowners themselves pay the PMI premium on a monthly basis, this kind of policy insures the bank against the default of the loan, and if an owner goes into foreclosure, the insurance will pay the bank the amount of the mortgage left unpaid. Therefore, if a mortgage is covered with PMI, the bank can collect the insurance on the policy they forced on the borrowers instead of seek a deficiency judgment. Citifinancial itself states that, "If you have Private mortgage insurance, a lender can use this money to offset any losses instead of getting a deficiency judgment."⁴

Now, investors and second home owners who have substantial assets may be at higher risk of being sued than first homeowners. But this is a very recent 2008 development. Robert Levin from Fannie Mae, announcing changes in the first quarter of 2008, stated that, "We are pursuing deficiency judgment against investors and second home borrowers."⁵ Will this be the case in all second home or investment home foreclosures by Fannie Mae? Only time will tell, but there is still little evidence that any deficiency judgments have been pursued thus far, and the nationalization of the mortgage giants will probably change this plan.

In fact, with the nationalization of the banking system and the Government Sponsored Enterprises, it is highly unlikely that any borrower whose loan that is taken over by the government will be subject to a deficiency judgment lawsuit. Instead, the politicians, in order to soften the backlash against the $700 billion bank bailout and to reassure constituents, will push much harder for loan balance writedowns, interest rate adjustments, and other loan modifications to make mortgage more affordable for borrowers.

So, it seems that deficiency judgments have been and will remain quite rare in the mortgage industry. Having extenuating circumstances (lots of land, numerous liquid assets, clear evidence of mortgage fraud) may put certain owners in danger, but the vast majority who took out loans and then faced an economic hardship will continue to have little to worry about from their bank after losing a home. There are just too many problems, from serving the lawsuit, to collecting on it, to bad PR, for the banks to think it is worth the extra bother.

Sources:
¹ http://activerain.com/blogsview/506776/Virginia-Deficiency-Judgement-Judgment
² http://floridaassetprotection.blogs.com/alperlaw/2008/07/deficiency-ju-1.html
³ http://banking.about.com/od/loans/a/deficiencyjudg.htm
⁴ http://www.citifinancial.com/glossary/defin/DeficiencyJudgment.htm
⁵ http://seekingalpha.com/article/75938-fannie-mae-q1-2008-earnings-call-transcript

For homeowners and bankers who took advantage of the housing boom and easy credit conditions to borrow far beyond their means, congratulations! You can expect to receive the greatest benefits from the government's new $700 billion bailout plan, with your greed, ignorance, or self-defeating financial decisions handsomely rewarded.

The new legislation significantly reduces the possibility of foreclosure (let alone sheriff sales or eviction) for those homeowners whose mortgage is taken over by the federal government. Because the perception in political spheres is that foreclosures are bad when they are being reported on the news, the government has indicated it will work with borrowers on mortgage modifications.

Especially now that greedy corporate CEOs of financial investment firms and insurance companies have been bailed out, with banks next in line for direct capital injections, politicians can not go back to their constituents proclaiming the virtues of the free market and that foreclosures will be tolerated as a necessary mechanism to liquidate bad debts. Foreclosure, like impeachment, is now off the table.

Homeowners who leveraged a home close to or more than 100% of its value during the bubble will be rewarded the most, since banks will not want to keep loans on properties that are underwater. These will be the first defaulted mortgages dumped into the new government TARP, and borrowers have little incentive to make the monthly payments.

Especially if there is a possibility the government will renegotiate the loan balance, the incentive is actually to stop paying and just keep living in the property until the bank sells the loan to the government. Then owners can negotiate with the bureaucrats to lower monthly payments and the loan balance to a more reasonable level, and the government will sell the mortgage back into the private market, leaving taxpayers to eat the loss.

Prudent home buyers who had saved money for a down payment will find that the bank will keep their loans, however. It is more profitable for them to foreclose on homes with equity and resell the properties on the market. Thus, savers and the financial responsible who face foreclosure due to economic hardships, as opposed to not wanting to make the payment on a house underwater, will get no help from the government program.

In fact, if homeowners know a greedy corporate CEO, it may be wise to partner with him in order to create more fake money out of thin air in a cash-out refinance on a hugely over-valued property, split the proceeds from the loan, and immediately default. The bank can sell the loan to the government and the balance will be negotiated down. Loan fraud has never been so easy when the government rewards it!

Car loans and credit cards are next, of course, with defaults rising in each of these and the TARP authorized to take on securities backed by such categories of debt. The more defaulted credit cards one has, and the larger the balances on each, the more likely homeowners will be to convince the government that all of their debt should be negotiated down due to poverty.

The president's advice after the attacks of 9/11/01, "go shopping," holds true more than ever now, since the government will pay for all of your purchases. The more cash you can take out of your home, ideally with a fraudulent appraisal, and the more you can put on your credit cards before your limit is restricted, ideally on cards you obtained through misrepresentation, the better your chances are for receiving some of the $700 billion bailout. And it is better to receive a part of it than to have to pay for it, right?

Obviously, most people will not go to such lengths and take advantage of their credit lines, and the very idea surely sounds absurd and predatory. Most people live within their means until inflation (caused by government printing money out of thin air to finance such programs as Wall Street bailouts) causes them to fall further and further behind. Few consumers voluntarily chain themselves to so much debt they will never be able to pay it back or commit fraud on banks in order to get free money.

But that is the point -- the government encouraged this kind of moral hazard behavior in banks for decades with one bailout after another, and now it is rewarding the same behavior in the average citizen. We are all greedy corporate CEOs now, living off borrowed money until the government bails us out of our inevitable failure. Federal backstops against failure mean that everyone can take on high levels of risk and then expect to be bailed out anyway.

No failure left behind.

Anyone hoping that the wildly gyrating stock market will stabilize anytime soon and begin its inevitable march back upwards to 14,000 and above may be severely disappointed for the foreseeable future. The most recent bailouts of the banking system and injections of liquidity have thus far failed to calm the markets for any reasonable length of time.

But then again, the economy did not need the $700 $850 billion bailout passed by Congress. The government, working with the banks, used an apparent crisis of confidence in the stock market to take more power for itself, this time to be able to interfere even more with the financial markets. Government always uses such manufactured crises to give itself more power, responding even to problems it caused with former responses to previous government-created crises.

Most of the top bankers knew how the money system worked in the United States and that they would prosper no matter how well or poorly the economy and even their own companies performed. Although much of the profits of the financial investment firms came from the securitization of subprime mortgages, CEOs could not have cared less about the real estate market overall -- they were making good money in an up economy and would make good money if the housing market crashed.

The banks were aware they would win any way the market went. If housing had stayed strong, banks could keep lending money to people who would never pay it back. By then purchasing those loans, slicing them up into bonds, and insuring the mortgage-backed bonds, they could profit by selling toxic loans to unsuspecting foreign pension funds in Norway and hedge funds in New York. As long as the housing market kept rising, high default rates were not a problem even if owners could not stop foreclosure -- banks could always just sell the houses for even more profit.

On the other hand, if the real estate market fell, the banks' stock would fall and a "crisis" would develop naturally. When that point came in late 2007 and early 2008 with the failure of the subprime mortgage industry, Bear Stearns hedge funds, and Bear Stearns itself, the banks partnered once again with government to increase the power of politicians to reward banks for bad behavior, poor lending guidelines, and moral hazard.

With the largest corporate banks partnering with the largest government in history, plans have been proposed to give government more power and the ability to invest in and take over any private company for any reason. The Treasury has plans to use its new authority to inject liquidity into worthless mortgage securities for face value. Such bailouts ensure that corporate CEOs will be able to keep the hundreds of millions of dollars they made during the boom, even as their clients, borrowers, and investors foot the bill for the bailout. Again, the banks and government win.

The length of time between an initial foreclosure notice and the sheriff sale of the property depends on a number of factors, including the homeowners' state, the severity of the foreclosure crisis in the area, and how the borrowers respond to the bank's lawsuit. Some owners may have just a few months to find a solution, while others have more than six months between the time of the initial foreclosure notice and the auction of the house. And the entire foreclosure process will also depend on how long it takes for the case to wind its way through the local court system.

Foreclosure time lines are determined by state law and local county rules, so there is not one way for the process to go throughout the country. Notice regulations must also be followed by the lender and its attorneys, and these are determined by state law. If they do not serve homeowners with paperwork or fail to put notice in local newspapers for the required time before the sheriff sale, the foreclosure is not valid and the borrowers may be able to have a sheriff sale rescinded after the fact.

Also, long before the property auction, the foreclosure lawsuit must go through the local court system. The bank has to prove that homeowners are behind in payments and that it has the right to force the sale of the home to satisfy the defaulted mortgage. Unfortunately, because of the foreclosure crisis and the nature of the mortgage industry over the past couple of decades, there can be a lot of problems with this part of the process. Homeowners can take advantage of these weaknesses in the system either to stop foreclosure or to gain extra time to put their lives in order before moving out of a house.

First, the bank may not even own the mortgage note if it had been securitized and sold off to hedge fund and pension fund investors around the world, as is the case with nearly half of the mortgage made over the past decade. Homeowners should make the bank produce the original note in court to prove it has the right to take the house in the first place. If the loan was originated by a broker, subprime lending outlet, or a mortgage company that is now out of business, the bank that collects the payments now may not even have access to the note.

Second, the courts in some areas of the nation are so far behind in foreclosure cases that it might take months for them to hear a particular case. If the borrowers file an answer to the initial complaint, hearings will have to be set and this will take even longer. Sometimes an extra month or two can go by between the time a motion is filed with the clerk of court and when it is scheduled for a hearing before the judge in the case. And then homeowners can appeal any decisions the court makes that they feel were made in error, which drag out the process for even longer.

Until the bank proves it owns the loan and that borrowers have fallen behind on the payments, it can not go ahead with a sheriff sale. Borrowers are not "taking advantage of the system" any more than the lenders themselves are when they defend a foreclosure aggressively and demand the bank prove it has the right to take their home and sell it to satisfy a debt that the borrowers may not even owe to that particular bank. While some may say that homeowners who took out loans they could not pay and are now staying in homes mortgage-free for years are part of the problem, they are no more a part of the problem than banks requesting hundreds of billions of dollars in bailouts and not providing assistance to borrowers.

Thus, how long a period of time homeowners have between the foreclosure and the sheriff sale of the property depends on state law, how far behind the courts are in pursuing these cases, and how much they fight the bank's lawsuit. It is nearly always in the best interests of the owners to take as much time as possible to stay in the house without a mortgage payment, pay off other debts, and save up money for the future. Especially as the banks have plundered the people for trillions of dollars, any extra time that homeowners can save money and not pay their mortgage will be useful in the ongoing economic recession.

Most people still believe that one bank holds their mortgage. After all, one household is responsible for paying the mortgage, so one bank must be responsible for collecting the payment and foreclosing, if need be, right? Of course, that is not how the system works anymore. Homeowners still send their mortgage payment to one financial institution (instead of a fraction of the payment to hundreds of owners), since one company usually keeps the right to collect payments.

But most people just are not aware of the fact that mortgage loans have been packaged, sliced, repackaged, resliced, and sold to foreign hedge funds, pension funds, and other investors. This is especially the case for subprime loans, which no financial institutions were interested in holding because of the high risk of default. Homeowners, though, will usually go about making their normal monthly payment to whatever name is listed on the mortgage statement, thinking the bank they are sending money to actually owns their mortgage.

The widespread ignorance of the American people in regard to the current nature of the mortgage industry is specifically what politicians and banks counted on when attempting to push through their most recent $700 billion bailout package. Although most of the nation was against the bailout in principle, it was eventually passed as an $850 billion rescue plan. The US Treasury now has the authority to buy up any asset from anywhere in the world and pay whatever price it determines and then sell that asset later on to whomever it deems fit for whatever price it is willing to accept. A recipe for corruption if there ever was one.

Thus, Senator McCsin has proposed another bailout relying on the ignorance of the vast majority of American voters by putting forth a $300 billion plan that would allow the government to purchase mortgages for their face values and then set about adjusting mortgage balances and payment terms. This is simply an insane plan to stick the government with losses on mortgage securities that the banks would otherwise have to realize or negotiate with their clients. But apparently it is more profitable for banks just to dump worthless securities on the American people.

It is difficult for politicians to lose an election by putting their faith entirely in the hostility of the people to hearing the truth. As long as the media does not mention the mortgage securities business over and over again, people will hold onto their old, outdated beliefs that their bank actually owns their mortgage. But McCain's newest bailout proposal, mentioned during the most recent debate with Senator Obama, will require taxpayers to take on the full losses for a mortgage financing system that few of them are aware of even for their own home loans.

It would be impossible to unravel the mortgage securities investments now, after they have been sold and resold hundreds of times around the world. But now McCain seems to think that the US government should buy these toxic securities from any bank, foreign or domestic, that invested in them, renegotiate the terms, package them, slice them, and sell them back to domestic and foreign investors, with all of us taking the losses on the loans. All to prop up a quickly deflating housing bubble and prevent the quadrillion-dollar derivatives bubble from unwinding too quickly. Stabilizing home values at an unsustainable level will have the effect of prolonging the market downturn and making it that much worse.

Problem: mortgages were packaged and sliced up, with no one having a stake in the ultimate success or failure of the underlying loan.
McCain's solution: package and slice up these same mortgages, and resell them so that no one has a stake in their success or failure.

With thousands of homes sitting vacant across the nation, each one a casualty of the foreclosure crisis, and some sheriffs reacting to the crisis by refusing to evict tenants or service lawsuit notices, the question is raised: why don't banks just rent out foreclosed homes? Although it may seem like a self-evident solution to keep more people in properties and prevent them from deteriorating due to lack of maintenance, there is a financial reason that banks do not rent out foreclosed homes.

For instance, if you have a landlord and something happens to your or your family as a result of the landlord's negligence and failure to keep the property in reasonably good shape, you can sue and possibly win a judgment for tens of thousands of dollars, depending on all the circumstances of what happened. Even if you do not win the lawsuit against the owner of the property, it may cost the landlord thousands of dollars in legal fees defending against you in court.

Why people rent out properties in the first place in the face of this legal risk may be uncertain, but many landlords only have one or a handful of properties they manage. Thus, the risks of being sued and losing and having to pay a large amount of money are relatively small. Because many property owners do not have deep pockets, it is unlikely a judge would award you or any other tenant millions of dollars in damages and penalties on the landlord. It would simply be impossible for the total amount ever to be paid back and would qualify as cruel or unusual punishment.

Banks, on the other hand, can be sued for ten or one hundred times the amount of a typical landlord because they typically have hundreds of millions or billions of dollars in assets. If a bank has to pay a few thousand dollars in punitive damages, that is nothing to the firm in the overall scheme of things. And it is worth your time as a renter to get injured on the property and bring a lawsuit for millions of dollars against the mortgage company acting as a landlord.

Even if you are only awarded a few thousand dollars, the bank will probably pay it quickly. It costs you quite a bit less to initiate a lawsuit asking for millions of dollars in damages against the mortgage company than it costs the bank to defend against such a case. The bank will have to hire local attorneys and spend potentially tens of thousands of dollars in legal fees just to avoid having to spend even more money later on if they do not defend the lawsuit.

And since some banks may have dozens or hundreds of properties in foreclosure in numerous states that could be rented out, they leave themselves open to the possibility of being sued perpetually by tenants attempting to cash in. Especially because banks do no upkeep to foreclosed homes, the chances of a renter being injured due to the bank's negligence is much higher than if the property had been owned locally by a private citizen.

Because of this, banks do not even bother renting out properties that they have foreclosed on. They would rather the homes sit empty and abandoned, as opposed to opening themselves up for lawsuits based on the condition of houses they are doing nothing to take care of. Even if banks lost one or two lawsuits to renters, it may cost them millions of dollars they would otherwise not pay by leaving the houses to sit on the open market for months, empty and abandoned and dragging down the quality of the community.

With the way the economy has been going for the past few months and the rising number of failed banks, it may seem that the only relief homeowners may get from a pending foreclosure is if their bank goes out of business or the entire financial system collapses. But while this may help some borrowers avoid paying their debts for a while, in the end, the banks and government will work something out to make sure everyone pays what they owe.

In a complete financial collapse, foreclosures may be halted for a while as banks holding mortgages fail, especially if the government does not step in quickly enough to take over the assets or arrange sales of the failed institutions (as it did with the sale of Washington Mutual to JPMorgan Chase). Even in the best case, though, this may only mean a temporary halt in the wave of foreclosures sweeping over the nation.

A complete meltdown of the economy and financial system will most assuredly be precipitated by a severe loss of confidence in the dollar and the banking system. Depositors will make runs on banks, taking out their money in the form of cash in order to prevent the institution from declaring bankruptcy and refusing access to currency.

Because banks do not hold very many reserves in their vaults, they will be unable to pay back everyone who demands money and will then be taken over by the Federal Deposit Insurance Corporation (FDIC). There is a limit to how many failures the FDIC can handle, however, and there is already discussion among bureaucrats and politicians that it may have to borrow money from the Federal Reserve in order to meet its deposit insurance obligations.

Even more worrisome is the fact that foreign investors may dump their dollar holdings (in the form of US Treasury securities) onto the world market, driving down the value of the dollar very quickly and flooding the market with a very large supply of devalued dollar-denominated securities. This would ensure that the government can no longer borrow money from these nations, thus restricting its ability to deal with an ongoing financial crisis by borrowing or monetizing debt through the issuance of more securities.

So the financial system may grind to a temporary halt as banks realize their insolvency and the government can not allocate resources to bail out financial firms or arrange sales of assets between a healthy bank and a failed one. This may leave a lot of foreclosure victims seemingly hanging for months or even years as no one is there to collect payments, negotiate mortgages, or even pursue foreclosure lawsuits in the local courts.

But debt collectors are like cockroaches. Although it may seem as if they have disappeared during the financial crisis, they are simply watching out for their own and plotting a profitable return. Collection agencies will survive almost any disaster and will be looking to purchase defaulted mortgage debts as soon as the economic situation has stabilized. This means that homeowners now facing foreclosure need to keep track of how many payments they have missed and be ready to make those payments when a legitimate owner of the debt comes asking.

So homeowners facing foreclosure should do everything they can to keep saving money even if their bank fails or the government can no longer meet its obligations. Lenders will go bankrupt and the FDIC may join them in not having the resources to guarantee deposits in a currency that holds any value. Families facing foreclosure may get a much-appreciated break from the stresses caused by losing a home, but debt collectors will be waiting on the other side of the collapse to begin buying up defaulted accounts and going after homeowners.

Saving money and keeping your home out of foreclosure can be very difficult in today's economy. A healthy diet and exercise can save you thousands of dollars each year in doctor and medical expenses. Many people complain that eating healthy is too expensive, but here are 10 affordable and healthy food items and ideas that can help lower your medical expenses and your grocery bills!

5 Low Cost Healthy Foods

1 – Beans. In a list of the top ten superfoods for antioxidant value as determined by a recent USDA study, small red beans was #1, red kidney beans and pinto beans were # 3 and #4, and black beans came in at #18. Beans can be purchased in bulk at a very low cost and will add a ton of fiber to any dish.

2 – Brown Rice. Unlike white rice, brown rice retains most of it's nutritional value. Brown rice is loaded with fiber, manganese, and Selenium. Eating brown rice can help you lose weight, reduce your chances of getting cancer, and even lower your cholesterol. Rice is very filling and inexpensive, so buy a large bag and make it part of your daily diet.

3 – Oatmeal. Eating a bowl of oatmeal every morning is a wonderful and inexpensive way to start your day. The oatmeal we are referring to is plain Quaker oats (or similar), not flavored, which contains added sugar. Oatmeal is packed with nutrients and will fight bad cholesterol and reduce the risk of heart disease.

4 – Chicken. Buy the chicken whole for a much lower price. One serving of chicken provides 70% of our daily protein needs. Chicken can help prevent Alzheimer's, prevent cancer, and help your cardiovascular system.

5 – Eggs. I can find eggs on sale for $.99/dozen and Costco sometimes has them for $.99/two dozen. Eggs are a good source of protein and have numerous health benefits, such as lowering the risk of breast cancer and preventing mascular degeneration. Contrary to popular belief, researchers have now determined that eggs do not raise dietary cholesterol.

5 Ideas To Eat Healthier And Save Money

1 – Cook foods from scratch. When you prepare your food from scratch, you can save money and eliminate all the unhealthy additives in processed foods. When cooking from scratch, you know exactly what your eating and you control the calories and fat. Preparing meals in bulk will be less costly and you can freeze any extras to use at a later time.

2 – Substitute low fat alternatives. This can be as simple as using ground turkey instead of ground beef, or low fat margarine, instead of butter. One example is using apple sauce or yogurt in cookies instead of butter. They cookies will still taste delicious, but you've eliminated 80% of the fat! Another simple alternative is to replace soda with tap water.

3 – Use frozen fruits and veggies. Frozen fruits and vegetables are often priced much less than their fresh counterparts, but still provide the same nutrients. Many fresh vegetables have traveled so far to get to your store that they've lost a lot of nutritional value by the time you eat them anyway.

4 – Shop at a local farmers market, or better yet, pick up your fresh produce directly at the farm. Buying food locally not only saves money, it's better for the environment. I go to the strawberry farm and pick my own berries for $5.00 a flat. That's about 1/10 of the price in stores and it only takes about 10 minutes to pick them. Many farms allow you to pick up your produce directly at a reduced price.

5 – Share meals when eating out. Most restaurants serve way more food than one person should eat anyway, so save money and share or take half home for later.

When buyers purchase a foreclosure home, they should not be surprised if the house is damaged or in a state of disrepair. Even if previous owners did not cause any damage, banks do not take care of properties while they have possession, which means that the condition may deteriorate rapidly. But purchasers often have no one to hold accountable for damage to the house, as the bank protects itself and former owners are no longer responsible for the house after the foreclosure.

If a new owners bought a foreclosed house from a mortgage company in "As Is" condition, then there may simply be no one to sue for damage to the property. It will be pretty clear to a judge from the as-is clause in the real estate sales contract that the buyers purchased the house understanding that there may be severe problems with it and that the bank was not taking responsibility to fix these problems before the sale.

If the house was not bought in as-is condition, then the new homeowners would have to sue the mortgage company that the property was purchased from. The bank was the previous owner of the house due to the transfer of legal ownership from the foreclosure sheriff sale and was responsible for upkeep and making sure it was in salable condition. This makes it the only party to sue for damage to the house, but only if the property was not sold in as-is condition.

But there is little chance the new owners would have any case against the former homeowners who lost the house to the foreclosure process. And anyway, they went through foreclosure and lost their home -- it is unlikely that they will have much money to collect for repairs to a property they no longer own. Furthermore, they can not even borrow money to pay the judgment against them if they are sued for damage they may have caused before they moved out.

The foreclosure victims have no responsibility for the house after their ownership interest has been transferred at the county property auction. At that point, it is up to whoever purchased the property (usually the bank) and that now owns the house either to disclose any problems before the sale or have them repaired.

Since banks do not care to do much with foreclosures, though, it is more likely it will sell the property in as-is condition and let the purchasers know the lender will not take any responsibility for anything wrong with the house. This is one excellent reason why foreclosure buyers usually have their own home inspection done before closing on the house. If there is a lot of damage, either the price will be negotiated down to take into account repair costs, or the buyers may simply walk away from the deal.

If the lender does not sell it to the buyers in as-is condition, then it might be responsible for making any repairs to the house for damage that was never disclosed to the purchasers during the sales process. But the owners would have to sue the bank responsible for disclosing the damage -- not the former owners possibly responsible for causing the damage.

It may seem that this article is somewhat late, in that the Senate and House of Representatives have already passed the $700 billion bailout for banks act and the president has signed it into law. After all, Wall Street is now saved, right? Wrong, and this bailout will just be one of many more that the financial power centers will require in order to complete the process of privatizing profits and socializing losses and securities fraud. Banks have been bailed out several times before, even during the current crisis, and the issue will be raised again when the current package fails to solve the crisis.

Thus, it is always in the interests of everyone who owns a home, is facing foreclosure, rents a property, or simply has any investment in the US dollar to oppose all government assistance to failing financial firms. Many of them are failing because the products they offered (mortgage securities based on subprime loans) have become worthless. Forcing families to purchase these so-called assets with no value for arbitrarily defined prices is government at its most economically violent. But there are numerous other reasons, as well, not to save Wall Street from its predatory actions against the American people.

Rewarding predatory lending and fraudulent mortgage servicing will only encourage more of these same acts. This is the most important reason why the companies that engaged in money laundering, securities fraud, deceptive sales practices, and inflating the housing bubble should be allowed to fail, declare bankruptcy, and have their business practices disclosed. Rewarding them by nationalizing certain companies or federally guaranteeing percentages of takeovers hides the truth from the people and will result in more fraudulent bubbles and more companies relying on the ignorance of people too poor to know the difference between sound financial practices and predatory loans.

Any bailout of Wall Street fails to address the underlying factor driving the downturn in the economy; namely, declining home values. Government can not step in and mandate higher real estate prices, and taking money from families to hand over the banks who made speculative bets on rising home values only papers over the problem. The bubble was inflated by the Federal Reserve and the banking system; home prices have to fall now or the market for real estate will effectively be frozen for the foreseeable future.

Government is also using violence and coercion in its bailouts against the people, while only giving banks "encouragement" to help families in foreclosure. Despite 90% of the country being against the $700 billion bailout, Congress just stole thousands of dollars from every family in America in order to force them to purchase worthless mortgage securities that no one in the world is currently stupid enough to invest in.

But when it comes to reducing mortgage balances, negotiating interest rates, or declaring a moratorium on foreclosures, the government either puts together voluntary programs that banks fail to participate in fully, or politicians claim that they can not interfere in private contracts or the free market. The government's monopoly on the use of force is obviously reserved for forcing homeowners to buy back their own worthless mortgages and then lose their homes anyway.

Finally, the government is not even overtly stealing extra money from families by raising taxes or other fees in order to come up with the $700 billion. Instead, they will borrow the money and issue more US Treasury securities, which will be pledged as security for dollars borrowed from the Federal Reserve. The Fed simply credits the government's bank account and dollars come into existence from nothing, thereby inflating the currency and debasing the value of the dollar. The only result will be higher inflation, and the more the government bails out Wall Street, the higher prices will rise for goods and services in the economy.

All that the government can do when rescuing one sector of the economy over another is redistribute wealth from one group to another. With the current financial crisis, Wall Street has demanded that families and individuals pay for the decades-long corruptions of financial firms, aided by government guarantees and federal backstops against failure. Now that banks are failing and the debt and derivatives markets are unwinding, wealth is decreasing for the average person saddled with tens of thousands of dollars of debt even as government is stealing what little wealth people have left in order to facilitate Wall Street being able to offer more debt to Americans.

There are 1000's of reasons to avoid foreclosure, but here are the top 10 reasons according to reader submissions on foreclosurefish.com.

Number 10
Moving to a new home will be too far from work. Many people purchase their home because of its close proximity to where they work. After foreclosure, it's very hard to find a new home in the same location, so victims must find a new job in a more affordable area.

Number 9
Business is run out of home or property. Families often use their home or property as a way to generate income, such as farmers, or anyone who owns a home business. If the home is taken away, it essentially takes away their livelihood as well. Families in this situation have more to lose than others and often need to start their entire life over after foreclosure.

Number 8
Don't want to move; the physical act of moving. - Many foreclosure victims have lived in the same home for their entire life and moving all their belongings to a new home would be nearly impossible. They can't afford to hire movers and they can't physically move everything on their own. In many cases like this, the sheriff comes with a moving crew and all the belongings are moved out into the streets. I personally witnessed this happen and before the home owners got home, all their belongings had been stolen right from the sidewalk. People ignored the yellow police tape and took whatever they wanted.

Number 7
Don't want to ruin credit scores. After a foreclosure, it's likely that credit scores will drop to under 500 points! This means they can no longer get approved for new credit, or if they can get approved, it will be at a very high interest rate. Homeowners in this situation will have a very hard time recovering from the effects of foreclosure.

Number 6
Can't take children out of school. Anyone with children still in school understands how hard it can be to find the right school for their children. Lack of affordable rental housing can uproot families and force children into a strange and uncomfortable situations.

Number 5
Can't afford to get a new home. It's estimated that nearly 25% of all foreclosure victims rely on friends or relatives for a roof over their head, while they get back on their feet. Getting a new loan after foreclosure is impossible for most and renting an apartment can be just as hard. Being forced to live with friends or relatives is a very humbling experience.

Number 4
They don't have anywhere else to go. What happens when there are no friends or relatives to stay with? This is probably the most dreaded situation of all; becoming homeless. When families can't afford a new home and have nowhere else to go, they become homeless after the foreclosure. I don't think we need to explain the downside of being homeless, but needless to say, this is one of the biggest fears of people in this situation.

Number 3
Don't want the bank/lender to take all their equity. When a homeowner goes through foreclosure, the fees and expenses can be ridiculously high and the lenders end up taking away all the equity from the owner. Homes are also sold for much less than their true value, so even if there was equity before the foreclosure, after the home is sold, there will be nothing left for the homeowner.

Number 2
Don't want to move; emotional reasons. Many times, the home being foreclosed on is a home that has been in the same family for many generations. The owners have childhood memories and remember stories their parents and grandparents told them about the home. If these homes fall into foreclosure, the victims will do almost anything to save the home. When eviction time comes, it's not uncommon for the sheriff to find these homeowners barricaded up and waiting with a shotgun!

Number 1
Don't want friends and family to know about personal and financial problems. Foreclosure is a process that happens in the court system, so almost everything is public record and advertised in the local newspapers. When someone goes through foreclosure, their personal troubles and hardships can end up as front page news!

If you are facing foreclosure, there are many option available, including government bailout loans, loan modifications, and many other legal options to stop foreclosure. Find out what options will work for you by getting your free foreclosure evaluation today!

Credit rating agencies compile consumer information that they receive from lenders and other related companies and assign borrowers a score based on their short and long term uses of credit. They exact methods used to assign one score or another are not nearly as important, though, as how much weight lenders place on credit reports when determining whether someone deserves a home or not.

During the housing boom, virtually the entire loan application process depended on the borrowers' credit scores. If a home buyer had displayed responsible use of credit, a prime loan was almost guaranteed, while debtors with lower credit scores were often given subprime mortgages to purchase or refinance a house. In any event, other qualifications like down payment and stable income history became far less important than having a high credit score.

One of the maxims of stock market investing has always been that "past performance is no indication of future results." However, this is exactly what mortgage lenders were counting on by giving huge sums of money to people who had good credit histories but little money or other resources to meet a financial hardship. Wall Street was willing to give mortgages to people and then hoped that they would pay reasonably on time, since they may have done so somewhat consistently in the past.

With the right subprime lender, even previous foreclosure victims and those who had filed bankruptcy numerous times in the past could obtain a loan to purchase a new house. Some banks specialized in such difficult to place mortgages, knowing it would be easy to increase fees and the interest rate of the loan because of the poor credit history. This meant more income for banks, investment firms, and investors, until the homeowners inevitable defaulted on their mortgage again.

The ratings agencies did not substantially alter their methods of scoring loan applicants or borrowers in general during the run-up in housing prices from the late 1990s to the middle of this decade. It was mortgage lenders that ignored other previously important loan qualification criteria and placed too much faith in simply having a good credit score. And having a somewhat poor credit history just meant more fee and interest income for the banks, so even that was no barrier against obtaining a mortgage.

While home prices were rising every year, this strategy made some sense for the banks, who could just loan money to everyone, collect the payments, and then foreclose on the house later on if necessary, selling it for a profit on the open market. But when home values began falling, investors realized they had been stuck with toxic loans going delinquent by the hour, and no one was buying the foreclosed properties at all anymore, let alone at a profit. Many lenders went out of business, while others began to tighten up lending guidelines.

It was at this point that the credit rating agencies began to take a more traditional role in the lending process. A good credit score more important than having any credit score at all, and mortgage companies began to focus on other factors like down payments and having a job that produced enough income to pay the mortgage. This is a more reasonable role for credit agencies, as a guide to assist mortgage companies in viewing a complete picture of a borrower's ability to pay a loan, instead of as the sole determinant of fee and interest income for every loan applicant.

One of the most recommended but least desirable options to save a home from foreclosure is filing bankruptcy. It seems like a solid legal defense against eviction and a way to get more time to work out another solution, but few homeowners really want to damage their credit for nearly a decade just for another chance to save their home, especially when other options may require decent credit. But filing bankruptcy should be considered a last resort by most homeowners in case nothing else works out in time.

In any case, filing bankruptcy and including the mortgage loan in the petition will temporarily stop any foreclosure proceedings or other collection efforts by the lender. The federal order for relief (also known as the automatic stay) will go into effect immediately, which will prohibit any creditors from pursing collection activities for as long as the stay is in place. This means that the bank can not move ahead with its lawsuit against the borrowers, nor have the house sold at a county sheriff sale.

But where the house goes from there depends on whether the owners file Chapter 7 or Chapter 13 bankruptcy. There are big differences between the two, and state exemptions and rules may determine which one filers best qualify for and what property they would get to keep under various circumstances. The best idea is probably to consult with a personal bankruptcy lawyer before moving ahead with either filing, although it is quite possible, easy, and cheap for homeowners who understand the process to file bankruptcy on their own using a book or online examples.

A Chapter 7 will allow debtors to discharge much of their unsecured debts and secured debts, as long as the creditors have access to the collateral for which the secured loan was guaranteed. That means that homeowners can discharge a mortgage under this type of filing, but the bank will get to keep the house as satisfaction of the debt. Homeowners will also not have to worry about a deficiency judgment (as rare as they are to begin with), as the house will be considered the best the bank can expect and any remaining balance on the mortgage will be discharged. If the borrowers owe $150,000 but the house has declined in value to $100,000, the bank can not try and sue for that difference later on -- it is simply discharged.

With a Chapter 13, borrowers will enter into a payment plan in order to get caught up on the debts that they have fallen behind. Currently, bankruptcy judges do not have the authority to lower mortgage balances or negotiate the regular payment terms, so homeowners would have to pay back the total amount they have fallen behind as well as keep up on their current regular monthly mortgage payment. For many homeowners, this can be prohibitively expensive; although, if they are able to make it through the 3-5 year bankruptcy plan, they will save the home and be current on the loan. However, it should be kept in mind that it they fall behind on the bankruptcy plan, the bank will quickly have the automatic stay lifted and put the house back into foreclosure.

Homeowners need to consider the pros and cons of filing bankruptcy as a solution to foreclosure. On the one hand, collection actions are halted immediately, the house can not be auctioned off, the mortgage can be discharged with no possibility of a deficiency judgment, and it is one more chance to get caught up. On the other hand, borrowers will not be able to keep their home in a Chapter 7 discharge, and the payment plan may be too expensive in a Chapter 13, and neither filing will stop foreclosure entirely as it only puts the process on hold while debtors use the federal courts in defense against creditors. Although bankruptcy should be a tool every foreclosure victim may have to rely on, it should only be used in the most appropriate circumstances.