The first thing I see about the government loan modification program is that it is a complete joke! Making Home Affordable ("MHA") modification program in my opinion builds false hope. Many of the large financial institutions have a 1-800-###-HOPE hot line alerting people to Loan modification scams, when in fact they are the very ones leading them down the wrong path.

Consider the case of Joe; he noticed in February 2009 that his lender was advertising the MHA program. Joe had lost 50% of his income at the start of housing crash and started experiencing some rough times. He had choices to make in regards to what accounts needed to be paid, keep a roof over his family, and sacrifice other accounts or do the opposite.

Joe applied with his lender in February 2009 for a loan modification by completing all the necessary paperwork. Joe was led to believe that as long as he kept his loan current, his submitted MHA application would be processed as soon as they integrated their system. Joe had built up a reserve account for rainy days, and so he started using funds from this account to pay creditors, and his high mortgage note. Joe called his lender every month to follow up on the process, and each time he would get the same answer, "Please call back in 30 days, we are still working on integrating our system." or "We are still waiting on the go ahead from the Obama Administration."

This went on for nine months until Joe exhausted all of his reserve account. He finally realized through bank representatives that submitted applicants with current loans were not being considered and that in fact his loan needed to be delinquent in order to get any kind of assistance. Here is evidence that Joe was deliberately given false hope and lead along by empty promises. At this point, Joe could no longer continue making the high mortgage payments, and informed the bank that he was at the end of his rope and they could have the house. There was no other recourse; he could not afford making any more payments. Shortly afterwards, Joe started receiving phone calls and correspondence from his lender with language such as: "Your house is your home. We want to keep it that way. We need to talk call…today."

Then there is the case of Jennie, a school educator, who through no fault of her own suffered a financial set back when she lost her job due to the economy downturn, and as a result also fell behind on her payments.

Jennie called her bank and notified them of her situation in the hope that they would work with her to find a way for her to keep her only home. Jennie was led to believe that it was all possible, even to the point of qualifying for the loan modification program through her bank for the three-month trial (the initial step in the loan modification process). The bank had agreed to put her in the LMP and provided her with a payment structure for three months.

Remembering when we talked about false hope earlier, Jennie’s problems did not end there. After making the first two initial payments, her bank rejected the third payment without giving any explanation. She immediately got on the telephone in an attempt to get answers from supervisors at her bank. To no surprise, they did not have an answer for her and told her call back within a few days while they research the problem. To date, she continues to call and they have yet to give her an answer. What a joke!

It is clearly a scam being run by banks and mortgage companies. Their interest is not in helping you, but helping themselves. With their words, they say they care, but with their actions, it is apparent that they could care less.

This amounts to the same as companies with programs saying that they can repair or even erase your bad credit. The reality is that no one can do that but you. There is no magic wand or magic formula to erase anything, only you can either pay the accounts off or not pay them.

This is not to say that loan modification is not possible. A small percentage has done so through their bank or lender under different loan modification programs. It is important to note that the three-month trial payment more than likely will not be the permanent payment after the trial period is over. If you are given final approval, your payment would be anywhere between the trial payment and the original mortgage note. Also, it is important to note that when dealing with the bank(s)/lender(s) you need to take a proactive approach. Dot your I’s and cross your T’s. Follow up on a daily basis until you get an answer, if necessary. Get as much people at the top (decision makers) involved in the process as possible, perhaps, someone will listen to you and do something about your situation.

This is the approach Joe took in our first case. Joe wrote letters to everyone in high places whom he could think of. Then he followed up those letters with phone calls and called the lender every day until he got someone who could assist him with his situation. At this point, Joe is in the three-month trial period in a property that has depreciated 50% of his value. This plan requires payments in the amount of "X" dollars for three months. At the completion of the trial period, the loan will be reviewed, again, and considered for a loan modification. Final loan modification will depend on the review of updated information that will be requested from Joe at that time.

We will track the progress on both these individuals and keep you posted!