"Bank opposition to helping homeowners, Senator Durbin says, "was (is) very shortsighted in light of the mess they have created in our economy."

Banks Are Not Serious About Helping to Keep People in Their Homes!

You have heard that "banks want you to be able to pay your mortgage, they don't want your house." I have even said that in the past. While true on an individual level, today, bankers are taking a short term view to first to protect themselves, (and their jobs) then deal with the devil later on.

Look at These Excerpts from Yahoo News, Friday, Feb 13, 2009

The (housing) industry strategy all along has been to buy time and thwart regulation, financial-services lobbyists tell BusinessWeek . "We were like the Dutch boy with his finger in the dike," says one business advocate who, like several colleagues, insists on anonymity, fearing career damage. Some admit that, in retrospect, their clients, which include Bank of America (NYSE:BAC - News), Citigroup (NYSE:C - News), and JPMorgan Chase (NYSE:JPM - News), would have been better off had they agreed two years ago to address foreclosures systematically rather than pin their hopes on an unlikely housing rebound.

A major reason financial institutions and investors are so determined to avoid modifying loan terms more aggressively has to do with accounting nuances, say industry lobbyists. If, for example, a bank lowered the balance of a certain mortgage, there would be a strong argument that it would have to reduce the value on its balance sheet of all similar mortgages in the same geographic area to reflect the danger that the region had hit an economic slump. Under this stringent approach, financial industry mortgage-related losses could far surpass even the grim $1.1 trillion estimated by Goldman Sachs (NYSE:GS - News) in January. A desire to postpone this devastating situation helps explain lenders' intransigence, says Rick Sharga, vice-president of marketing at RealtyTrac, an Irvine (Calif.) firm that analyzes foreclosure patterns.


What About the Plans Already Announced to Help Homeowners?

Hope Now Alliance, a government-endorsed private sector organization announced by Paulson on Oct. 10, 2007. Lenders promised to cooperate with nonprofit credit counselors who would help borrowers prevent defaults. Faith Schwartz, a former subprime mortgage executive, was put in charge.

An analysis White did of a sample of 21,219 largely subprime mortgages modified in November under Hope Now in 2008 found that only 35% of the cases resulted in lower payments. In 18%, payments stayed the same; in the remaining 47%, they rose. The reason for this strange result: Lenders and loan servicers are tacking on missed payments, taxes, and big fees to borrowers' monthly bills.

Then there was Hope for Homeowners. It was already anticipated that its fine print would discourage all but a few borrowers. "We knew it was likely to have limited appeal," says Preston, the former secretary of HUD, which oversees the FHA. George Miller, executive director of the American Securitization Forum, a Wall Street trade group, calls the program and its 25 refinanced loans "useless" because of the onerous details.

The banks clearly are looking out for themselves first and foremost. As one banker put it, "Banks are too big to fail and homeowners are too small to bail!"

So, that is their attitude. They foisted fraudulent financial products onto homeowners and are now refusing to take responsibility and help their victims.

Here is a Typical Story of Homeowners Hoodwinked by the Banks!

Stefanie and James Smith of Santa Clarita, Calif., fear they may need the help of a bankruptcy court if they are to keep the subdivision home they bought for $579,000 in November 2005. Stefanie, 37, a university human resources coordinator, and James, 40, a federal law enforcement agent, borrowed the entire amount in two subprime loans that required a total monthly payment of $3,000. A representative of their lender, Countrywide, told them not to worry, says Stefanie: They would be able to refinance in a year.

By mid-2007 they were running late on payments, and refinancing options had dried up. With their monthly bill scheduled to jump to more than $4,000 this January due to a rising mortgage rate, Stefanie contacted Countrywide last summer. She asked for a loan modification so they could avoid default. In December the lender said it would be willing to increase their payment by $600. That was better than the scheduled rise of $1,100, so the Smiths agreed.

But now they are struggling to pay the higher amount. Countrywide's parent, BofA, declined to comment, citing the Smiths' privacy. After BusinessWeek's questions, though, Countrywide called them to discuss cutting their payments.

"We knew when we bought that the payments would be a stretch," says Stefanie. She regrets assuming they would be able to refinance at a lower rate. "We are not deadbeats," she adds. "All we want is a mortgage we can afford."

Our Advice to Homeowners Facing Foreclosure!

If you are now losing your home because you cannot pay your mortgage, don't rape your 401(k) or your children's college fund, you will Never be able to replace those funds in the economy we are entering.

Accept the possibility that you have already lost your house, you did sign the mortgage, probably without being represented by a lawyer, that is your responsibilty.

Now, you can either be put out of the house with No money left to your name, a bad thing, having raided your savings, retirement and children's funds, or you can stop paying now and be put out later with your savings intact to finance a new start, a better outcome.

With more and more people underwater, making payments on homes worth less than their mortgage, this will become a popular tactic and will eventually force the banks to help.

In fact, we are seeing an increasing number of people who stop making their payments and challenge the banks in court. If the bank cannot produce your original mortgage and note, they cannot proceed with the foreclosure! It is estimated that fully 40% of banks cannot produce this documentation, so it is well worth the risk.

Contact me directly if you would like more information on this subject or assitance in implementing it. I can be reached at 646-961-3818

Oh, what about the Moral Hazzard such a brazzen act of self help would produce? I think the danger of producing Moron Hazzards are much greater; people exhausting their money to make payments on homes that are underwater!