Expert after “expert” has been testifying that some things would make the program work better:

- letting a new servicer compete for the refinancing or loan mod

- letting non-Freddie or Fannie backed mortgages be eligible

- dropping the loan-to-value requirements for qualifying

Now I understand that the government would be interested in changing the rules of a publicly embarassing program to try to improve things but it doesn’t seem to me that any of these suggestions addresses the real issue. In a nutshell:

If it’s not worth it for a bank to particpate in the program, then what good will it do to allow more banks in? Now you’ve just got more banks who are eligible but don’t want in.

And make more loans eligible? I believe those loans would be known as the “riskier” loans which could set the whole recovery back if they default again.

So what’s this really going to accomplish? How is this going to finally convince banks to make a solid effort at renegotiating bad loans? I’m pretty sure it won’t, but let me know what you think.

Actually, that’s not the shocking one. Here it is:

4.4 million underwater borrowers have both first and second mortgages.

That’s not just shocking, it’s downright scary.

Now the current government “thinking” regarding helping them get sorted out is principal reductions. And the banks are not putting up a terrible fight about this despite what you’d think. And for good reason. Can you guess what it is??

They’re not losing the money!

Crazy as it may seem but that’s basically the truth. A report has just come out that the deal the big servicers struck means they get to write down first loans along with second ones equally. And most first loans are funded by investors while second loans are covered by the banks. So the losses are split, not like in the old days when banks took the hit first.

So even though the banks cut corners everywhere, even though they’re getting massive payouts from the government, and even though their not even bearing half the losses, they’re still whining!

I tell you, if the banks don’t stop complaining I’m going to have lots to say about it. Or I’ll apply for a job with them. You know what they say, if you can’t beat ‘em, join ‘em.

We’ve all seen the debate rage back and forth about the best way to help homeowners keep their homes. (Let’s for the moment not even get into the question of how they got into those homes in the first place.) Loan mods, principal reductions, etc. Now principal reductions are kind of the black sheep of the discussion, or the pink elephant, I’m really not sure but no one knows quite what to make of them.

The problems with principal reductions become even worse when we start talking about loans backed by Fannie Mae and Freddie Mac. Because you know who gets hit with the losses in the end – you and me. But then again, you and me are the ones benefiting from the reductions. And if you’re a homeowner underwater you might appreciate getting the chance to get even on your loan. Or you’ll sell at a bargain and skew the market even more than it is. Or then again you might opt for a strategic default and knock us all flat on our backs.

So you can see it’s a tricky question.

And as I said, Washington is throwing the challenge at us. Which end of the rope are we going to be pulling? Are we opting for principal reductions and taking the hit as taxpayers? Are we sticking it to Washington and holding firm? I think you know where I stand.

The entire country woke up long ago to the FACT that short sales are the only things that will right the market. Banks are willing to do it. Homeowners who got in over their heads are willing to do it. Washington will eventually get behind it. So forget the debate. Get out there and do what you know is right.

I’ve warned people away from these scammers for years and encouraged short sales as a legitimate, tried-and-true method for dealing with a losing situation, one that saves dignity, and most of all, money. But some people get sold on all the false promises of free help and end up suffering for it.

If you’re approached by anyone asking for an up front fee to rescue you, or asks you to do anything fishy, I encourage you to stop and think for yourself, or at least get a lawyer to help you out. Don’t rely on the government to catch the crooks, they’re only now catching on to how serious the problem is. (How many of the 6.3 million behind on their payments would still be current if not for scam artists?) TARP has a whole patrol squad out to get these people. But it’s not necessary. Just be smart and don’t let feelings of hopelessness get the best of you.

You’re an intelligent, confident person. You can help yourself and don’t need some shyster to get you. You are strong and capable and I believe you are the best person to help you. If you need to find help, go to someone you can trust. Look to those who empower you, not those who knock you down.

If you’ve been hurt by a scam, please, share your story. Others will learn, will share, and will grow.

Well, at least that’s the plan according to the Nevada Attorney General. She’s decided the play hardball by filing criminal charges against title officers of Lender Processing Services for, yup, robo-signing. They’re guilty of just about everything a lazy title officer can do – falsifying documents, falsifying certification, signing or notarizing not in the presence of the signatory, etc. etc. It’s a list of the worst of the offenses that every major loan servicing company is guilty of.

I’m happy that someone is willing to name names and clean up some of the mess, but I just love the additional bit of irony that it’s Nevada making the news. The entire country made bad loans, the entire country foreclosed on homes illegally, but it’s two lonely guys in Clark County who were probably just being lazy who get the entire country’s blame.

What a cool system! Think we can make them pay back the trillions of dollars that they owe the economy? Nah, we might just stick these guys in jail and end up paying for them!

Have a great weekend guys.

(I’m really not interested in whether it’s going to accomplish anything, that’ll be a fight for another time.)

4.5 million borrowers are going to have their loans reviewed by the Federal Reserve Board to see if they got robbed (yes, robbed) by mortgage giants. They called it “imposed financial hardship” but can we really put a price tag on illegally throwing a family out of their home.

So we’re likely to see some major scandals break over the next few months. We probably don’t even know half of the shady deals these banks have been doing behind the scenes. But if the government stands to make any money off of exposing them (since I don’t think too much money is going to wind up back in the homeowners’ hands) we’re sure to see something interesting.

Let me know what you think about this one. Are you expecting Uncle Sam to stick up for the little guy? Will the banks find just another way to evade the law? And how is it going to play out for me and you? Let’s keep the cynicism to a healthy level but be honest if you think the system needs a bigger shakeup than Congress is capable of.

We all know that the nation’s biggest banks are being investigated left and right for all sorts of “funny” accounting. Basically to save themselves money and limit their risks they skimped on paperwork, due process, and legality to “get the job done.” And it’s taking plenty of government manpower to figure out just how deep the rabbit hole goes.

Well, a couple of lawyers have just found a new loophole the big banks have been using that just hasn’t been noticed until now and it will potentially cost the taxpayer a ton of money. Basically, not only were banks offering lousy mortgages, they were targeting specific people for them. One group they got hooked is veterans. Since veterans can get refinanced loans backed by the government, banks figured it was a sure bet to dump worthless assets on our dedicated veterans knowing full well they would default.

This has so far amounted to hundreds of millions of dollars in loans that you and I will have to cover. But as this story is breaking the Dept. of Veterans Affairs is realizing just how exposed they are and they’ll do what they can to fight back. It turns out that to get these taxpayer-backed loans, the banks had to, of course, fudge the paperwork. This means they’ve violated a whole mess of laws – meaning they’ll owe damages plus $11,000 per violation.

I think lawyers will be unraveling these schemes for years but each time I hear a new one I’m at first disgusted by the banks disregard for the law, and then slightly impressed by how well they can juice the system. But hopefully when this whole mess is sorted out the banks will get what’s coming to them.

Any suggestions what that should be?

Here’s a ridiculous example for you:

Obama, in the middle of a long speech, slipped in a line about refinancing just about every mortgage in America.

Not much publicity for something that’s going to mean covering 2.9 million mortgages. But maybe he was shy.

Either way, here’s how the numbers break down:

- GSE savings = $3.9 billion

- Fed. Reserve losses = $4.5 billion

- Private investor losses = $15 billion

So basically the Federal government stands to lose about $600 million on the deal and private investors will lose $15 billion. You can imagine this is going to turn into a pretty messy battle.

So are you and me supposed to sit back and watch the action? Are we supposed to take sides? And if so, whose? I’m sure a lot of hurting families out there need those refinances at lower rates, but someone’s going to lose in this deal. Maybe it’ll be the banks, but don’t they have feelings too? Maybe not. Have a great weekend.

Of course, they didn’t say it in quite those words. No, they used fancy expressions like “Our … transfer strategies directly support company goals … to divest certain non-strategic assets, and to continue to improve the company’s capital position by reducing holdings of capital-intensive assets.”

Wow, that’s a mouthful of hot air. What they mean is they’re losing money badly and finally got smart. What happens when a bank loses cash? They look bad and weak. So toss all the bad mortgages on Fannie Mae. What happens when Fannie loses cash? The Treasury dives in and throws more of our money at them. It’s win-win-lose (BofA-Fannie-Us).

Exciting times, aren’t they? Well, not to worry, guess how much confidence Fannie has that you and I have made a good investment in these loans. Not much, I’m afraid. Loans worth $73 billion were sold in one bundle for the grand sum of $500 million.

I’m heading for the hills. Anyone joining me? Would you take a gamble with taxpayer money on a nut-job adventure like this? I can’t believe what our government’s trying to pull on us, but each day is just one insanity bigger than the next.

Isn’t that a relief?

Well, if they’re going to be dipping into Treasury funds anyway so why not make it less instead of more? Of course, they’re doing worse this year than last, but don’t worry, they blamed it all on “continued weakness in the housing and mortgage markets.” But I hear those problems are set to clear up any day now. Yep, any day, we’re just holding out hope.

No, forget this, enough sarcasm. I’m tired of government agencies falling to pieces, draining taxpayer money, and complaining things are hard. You know what people like you and me do when the market turns sour and things are hard? We get smart, we get involved, and we make a difference. This is the market to be making a killing on short sales. But less than a quarter of all bad loans that Fannie Mae got off the books were through a short sale. Don’t they realize everything else just drives down the market and makes this recession longer?

But that’s government for you. Pay your way through everything and leave the problem to the next guy. It’s a system that’s not going to work for much longer and we’re going to foot the bill. So my advice: put your money in motion now and find the real deals that will make your fortune. They’re out there waiting to be had.