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Can Obama Fix the Making Home Affordable Program?

The New York Times reported today that the Obama administration is to meet with Treasury Department officials to try to streamline the paperwork for homeowners who are seeking to use the Making Home Affordable program- which was designed to provide relief to homeowners in danger of losing their homes through foreclosure, and has been widely regarded as a huge failure. While reducing paperwork is always a good thing, I don't believe that this adresses the real issue facing many emperiled homeowners.

Here in South Florida, I believe that the biggest problem is not the mountain of paperwork that homeowners must provide (although that admittedly doesn't help), but the facts and figures that must be put on those papers.

In the hey-day of the real estate frenzy, lenders would do whatever they could to "get the business". As we now know, a lot of what happened really amounted to fraud. Home buyers got their loan and trusted the lender- probably a little too much. Many loans, especially here in what has often been called the "Fraud Capital of the U.S." should never have gone through. Why did they?

It's not enough just to say that the banks made bad loans. There were actually guidelies in place to prevent unqualified borrowers from getting loans, but they got them anyway- often by mortgage brokers creating outright works of fiction on the paperwork submitted to the lender's underwriter. Padded incomes, bank balances that appeared to magically increase overnight by thousands of dollars, unverified everything. Yes- the Wild West was alive and well- on paper at the mortgage broker's and lender's file cases!

That's where the problem lies. People that should never have been granted a loan now have to not only prove that they qualify for one now- at a reduced rate- but they also have to submit the paperwork from their original loan- which often has fraud written all over it.

What to do? It really is like being between a rock and a hard place. You can't afford your current loan due to fraud, and you can't submit your old paperwork to government scrutiny to get a modification because they will detect the fraud- and you may have to face the penalties.

I wish that I could come up with the solution for these homeowners. We know there is plenty of blame to go around, and if the money was there, I would take a little from those I hold responsible- the dirty mortgage brokers, the lenders that often intentionally turned a blind eye to what was going on, the Federal Government that allowed the banks to feed thier greed by any means (until it crashed the whole country), and even many borrowers and property appraisers who knowingly played the fraud game.

Now as a disclaimer- I have to say I'm not including everyone from all these sectors- there are plenty of good honest mortgage brokers and other professionals- I'm happy to say that I work with many of them. The same is true about homeowners- many were just plain duped- some got wise and refused to play the game. 'Nuff said...

Back to my question- Can Obama (and the Treasury) fix the Making Home Affordable program? Sadly, I don't think so. Unless some kind of policy is put into place which would, in essence, forgive some level of fraud (which I think is a very bad idea) the program is doomed to its' continued failure no matter how streamlined the paperwork may become.

I know that in many situations that, as a Realtor, I can help distressed homeowners by doing a short-sale, but if there's a way for someone to keep their home and make it affordable, that's obviously the best case scenario.

I'd like to know what you think about this issue, and especially what you think can be done to help the honest, hardworking homeowners that are stuck with few choices, and little hope. Should we allow a little fraud, or even a lot of fraud to pass by without consequences (other than the bind the homeowners are now facing), or is their pain itself a sufficient consequence?

I hope we can come up with a responsible, workable solution that helps our neighbors relieve their pain- and allow them to keep their homes and their dreams alive.