As I said in my last post, it’s becoming quite clear why none of the government’s heavily-hyped foreclosure-prevention programs seem to work.

Most of the blame has to be laid at the feet of the banks and mortgage companies that made and service all of the deceptive, unaffordable loans that created the housing crisis.

The first reason is that lenders have refused to hire the number of people they need to rework the millions of bad loans they created.

The second reason is that a shocking number of the loans they made during the housing bubble were more reckless and irresponsible than anyone wants to admit.

Too many of the families seeking help aren’t in just a little bit of trouble.

They’re in a lot of trouble.

They don’t make nearly enough money to repay the huge sums they were allowed to borrow, and owe so much more than their homes are worth, that it’s is impossible for any program to save these deals.

Obama’s refinancing plan allows banks to loan up to 105% of the current market value of a property. In other words, a family can owe 5% more than their home is worth and still qualify for help.

Yet many of the families who want to take part aren’t just a little underwater on their mortgage. They owe 20%, 30% or even more than their homes are worth.

Obama’s mortgage modification plan encourages banks to reduce interest rates and extend payment terms to lower monthly payments to no more than 31% of the borrower’s gross income — a common measure of affordability.

Yet most families aren’t in trouble because they’re spending 35% or even 40% of their income on housing.

They’re in trouble because the payments on their adjustable-rate mortgage have increased so dramatically that it’s gobbling up half, or more than half, of their income.

It’s not uncommon for families making $50,000 or $60,000 a year to be carrying $300,000 or $400,000 in mortgage debt. That’s not a little more than they can reasonably afford. That’s two to three times what they can reasonably afford.

To make the payments low enough to save those homes, banks must not only be willing to slash the interest rate, but forgive some of the debt — an option they’ve repeatedly rejected.

So what happens?

Overworked loss mitigation departments push the hopeless applications aside to pursue more promising cases.

Angry homeowners don’t understand why their repeated phone calls aren’t returned and why the government program they heard so much about isn’t helping them save their home.

Or the bank offers a catch-up plan that just adds the missed payments back into the loan, increasing monthly mortgage payments the homeowner already can’t afford.

The lender then counts that loan as a “modified mortgage” even though the home is on its way to foreclosure just as surely as it was before.

Bottom line: Bush counted on far more cooperation from the industry than he ever got, and now Obama is headed down the same path. If the president can’t solve these two problems we’ll soon be adding his foreclosure-prevention program to Bush administration’s list of failures.

President Obama’s anti-foreclosure program is off to a better start than either of President Bush’s completely failed efforts.

But that’s not saying much. Only about 100,000 homeowners have been offered mortgage modifications through “Making Home Affordable” since the program began this spring.

At that rate, it will never reach its stated goal of saving 4 million homes from foreclosure.

It’s also becoming quite clear why none of these heavily-hyped government programs seem to work — and the blame can be squarely laid on the banks and mortgage servicing companies.

The first reason is that lenders have never increased their loss mitigation staffs to anywhere near the size needed to deal with the crisis they created with all of their reckless loans.

After seeing story after story about how hard it is to get anyone on the phone, how borrowers are passed from loan specialist to loan specialist and asked to submit the same paperwork time and time again, I think we get the picture.

“This process has been extremely frustrating, with a lack of returned calls from BofA, and me having to contact different loan officers,” Jose Rivera of Manchester, Conn., recently told CNNMoney.com. “As a taxpayer whose taxes have been used to assist these large financial institutions, it is extremely frustrating, disappointing and discouraging to receive such a lack of assistance and poor customer service from these banks.”

The banks and mortgage servicing companies were more than willing to hire the thousands of employees it took to sell the mortgages that created the housing bubble because they made money off of that.

But it costs money to hire the thousands of employees it will take to fix those mortgages and they aren’t going to do it.

Charles Scharf, who runs J.P. Morgan’s consumer banking operation, acknowledged that customers are frustrated with all of the delays in an interview published in Wednesday’s Wall Street Journal.

“It is taking us longer than we want it to take,” Scharf said, “but we will do everything we can to build up our resources.”

Excuse me? This crisis didn’t start last week. It started two years ago. If you were serious about hiring the staff needed to deal with it, you would have done so by now.

The banks simply figure that if they drag their heels long enough, all of the homeowners that need help will default, fall into foreclosure and the problem will go away.

I’ll cover the second reason these programs are failing in my next post.

Visit msnbc.com for Breaking News, World News, and News about the Economy

NBC’s news magazine took a good, long look at the cause of the mortgage crisis last night.

Dateline doesn’t break a lot of new ground.

But starting with the story of Paula Taylor, whom Countrywide loaned $260,000 to buy a condo near Boston with monthly payments of $2,100 on an income of $1,600 a month, it presents a clear and concise explanation of how millions and millions of bad loans were made.

NBC points a telling finger at all the major players — lenders, Wall Street, ratings agencies, Congress and yes, the borrowers themselves.

“So much blame to go around,” the report says, “and yet so few willing to acknowledge it.”

When an executive says Standard & Poors had no way of knowing how risky the loans were, Harvard law professor Elisabeth Warren shoots back: “I’m sorry, the only people who can say ‘We never knew,” are people who didn’t want to know.”

It’s worth watching.

But you may be surprised to hear just how much credit the banks that issue Visa and MasterCards, and credit card companies such as American Express and Discover intend to take away from us.

More than half is the astounding answer from Meredith Whitney, the Wall Street analyst who became famous for predicting the current banking crisis.

In an opinion piece she wrote for the Wall Street Journal, Whitney says consumers have used about $800 billion of their $5 trillion credit lines.

But the amount of available credit was reduced by $500 billion in the final three months of 2008 and by the end of 2010 Whitney expects the amount of credit available to consumers on their cards will be down to about $2.3 trillion.

Besides the obvious — we’ll be able to buy less — the campaign to slash credit limits is also starting to hurt credit scores according to USA Today.

That’s not surprising, since 30% of every FICO credit score is based on how much available credit has been used. Fair Isaac Corp.’s formula penalizes consumers who have tapped more than 50% of their available credit. Slash the amount of available credit and you’ve got to push more consumers over the 50% threshold.

Another 15% of the score is based on how long credit card accounts have been open. So closing a long-held account hurts too.

Home Short Sale : A process by which you sell your home for less than you owe on it.

In recent years, the popularity of the short sale has increased due to rising loan defaults. A short sale is a process by which you can sell your home for less money than you owe on it. Although still not a common way to avoid foreclosure, the short sale can work if the mortgage company is willing and your buyer is committed.

Negotiate with Your Mortgage Lender to Work out favorable Short Sales Terms

Your mortgage company will consider several factors before approving a short sale. And, ultimately, the decision to approve the sale is completely up to them, so you and your buyer will want to be as cooperative as possible. Short sales often take longer to implement than a standard home purchase, so you’ll also need to be patient.

The mortgage lender will want to know the circumstances that caused you to fall behind on your mortgage payments and what your future financial prospects for repayment may be. They will also do their own assessment of whether it is more profitable to approve the short sale or repossess the property and put it on the market themselves. Although most mortgage companies are helpful, their goal is to make money so they can ultimately decide to proceed with foreclosure.

Don’t Drag Your Co-signer Down With You!

If you have a cosigner on your home loan, the lender will want to investigate the chances of obtaining payment from the other party(ies) and they will also look to see if you have any other properties currently in default before approving a short sale.

Second, and probably more importantly, you are purchasing the foreclosure property as is. This means that any repairs that the home will need, and any code violations that the code may have are completely your responsibility. Bear in mind, that if the previous owner was unable to meet the financial obligation of their mortgage, they may also have been financially unequipped to deal with basic property maintenance. As such, you may be purchasing a home with could require a substantial investment before it is even in livable condition. Some foreclosure sales do not allow an inspection of the property, and, if you can do an inspection, you may have to do so with all of the electrical, water, and gas systems shut off as the mortgage company will not generally pay to keep the utilities on. Therefore, you will have no way of knowing what shape the home’s major utility systems are in.

Third, if the mortgage lender has not initiated the process of eviction, it will fall to you as the new owner of the property, to evict the previous owners, tenants, or whoever else may have been occupying the property. In some cases, the previous residents have already vacated the premises, but have inflicted intentional damage upon the property before doing so. It is not uncommon to purchase a foreclosure that not only needs to be cleaned out, but has been completely stripped of its interior.

Although the benefits of buying a foreclosure are numerous, there are also some drawbacks that may keep some eager buyers from taking the bait. Buying a foreclosure is a gamble that pays off for some and not for others and it is certainly not for the faint of heart. However, buying properties at foreclosure auctions can also be a great way to pick up a valuable property for a fraction of its value making the process more appealing to a wider number of home buyers.

After you have submitted all of the documentation the lender asks for to determine the viability of your financial situation; documents such as a hardship letter, paystubs, medical bills, bank statements, and any other evidence that proves your predicament; and, assuming that the lender agrees that you are likely to be unable to repay your loan, the mortgage company will order what is called a brokers price opinion.

BPO (Broker’s Price Opinion) is Key to a Short Sale

The Broker’s Price Opinion, or BPO, is the process which gives the lender an idea of the market value of your house. This is one instance where you want the value of your home to be low. If the broker’s price opinion is high, the mortgage lender may elect to foreclose on you home and put the house on the market themselves, where your property will be snagged up by home foreclosure buyers. So, the lower the BPO, the more likely it is that your lender will approve the short sale.

Finally, your buyer will need to submit documents indicating the costs involved in the sale and where financing for the sale is coming from. After they have reviewed all of the required documentation and determined that a short sale is in their best interests, the lender will give permission for the sale. Although the process is long, frustrating, and somewhat intrusive, you avoid foreclosure, your mortgage lender gets the best deal they can, and your buyer gets a home for less than market value.

Buy Houses at a Foreclosure Auction

Although some savvy real estate investors elect to purchase homes in the pre-foreclosure stage via the short sale, most choose to avoid this lengthy process by sticking to properties upon which the lender has already completed the foreclosure process. Once a lender forecloses on a property, the maintenance of that property becomes the responsibility of the lender. As you can assume, the lender wants to make money off the property, not invest in its upkeep. Because of this, if a lender puts a home on the market via a conventional realtor, they will not want to keep it on the market for long, and will eventually opt for a foreclosure auction to unload the property to the highest bidder.

Don’t Pay for Foreclosure Listings—They’re Free!

After the mortgage lender takes possession of the property, you can purchase it from a listing agent or via auction. There is no need to spend money on foreclosure listings offered on the internet because if you are truly interested in purchasing a foreclosed home, there are many resources to be had for free. These listings are public information and can be obtained simply by contacting a real estate agent, county sheriff’s sale office, by visiting government websites, or the websites of the auctioning agents.

Foreclosure Auctions Offer Great Deals on Properties

Foreclosed homes used to be auctioned off for generally less than fifty percent of their fair market value. However, the popularity of this means of home buying has resulted in greater attendance at foreclosure auctions and, more bidders means more competition, which leads to higher sales prices. Still, foreclosures are going for easily a minimum of ten to twenty percent off the market value of similar properties making them a substantial investment.

Negotiation Tips to Bring up With Your Lender

The first thing to remember is that your home mortgage loan company really doesn’t want your house. They would much prefer to have their money instead. With this in mind, as long as your financial setback appears to be temporary, your mortgage company will usually be surprisingly happy to work with you to help you retain your house.

Mortgage Lenders Can Offer Flexible Repayment Options

Lenders are actually equipped to handle the temporary financial setbacks that their customers sometimes experience and have devised repayment plans designed to help you regain control of any late mortgage payments.

Negotiate Rolling Payment Plans with Banks

Most of the plans that mortgage lenders use to help you get back on track involve either rolling the late payments to the end of the loan, breaking the payments up over the next few months and paying a certain amount toward the past due balance in addition to your regular monthly payment, or completely refinancing the loan. If your financial troubles are more than temporary, you may want to discuss placing your house on the market or opting for a short sale which can be discussed with your mortgage company.

Act Early

Whichever route you choose, the main thing to bear in mind is to contact your mortgage company as soon as you realize that making your payments has become a problem. By keeping in touch with your lender, you are creating a line of trust that can only help you in the long run.