I have a few major pieces of advice. First, contact a housing counselor immediately. Through the HOPE NOW program, housing counselors can help you figure out your options and, hopefully, avoid foreclosure. Plus, the counselors are available free of charge, so you’d be crazy not to take advantage of it. Distressed borrowers can call HOPE NOW directly at 1-888-995-HOPE (4673) to get started on the process.

Additionally, you need to stay on top of your lender. Lenders like Countrywide are already notorious for their poor customer service and are also working with many other borrowers in your exact situation. Don’t count on them to take care of things without a little pressure. Also, don’t be afraid to negotiate. When you lose your home, they lose money; so they should be willing to make concessions to keep you in your home.

Lastly, don’t count on pending legislation or litigation to save you. Although states like Illinois are pressing for restitution from Countrywide, no one should wait on a decision like that (which could take years) to be helped out with current mortgage problems.

Basically, take things into your own hands and be persistent.

This is great stuff but it never quite gets to an important point: There was no FHA mortgage meltdown.

Fewer FHA loans, yes — after all, how could the staid, old-fashioned FHA program compete with mortgages which required nothing down and little meaningful financial disclosure.

But an FHA meltdown? Didn’t happen.

By sticking to its standards, the FHA has been an oasis of financial sanity.

Miller’s FHA insights tend to be spot on and this is no exception. Maybe the WSJ will take note and add an article on this topic to their growing archive.

To be clear, I’m not against the program, provided it’s putting people into a strong, stable financial situation, and if the default rates are only slightly higher than those for regular FHA loans. The key is to set higher standards and aim to help people get ahead financially, instead of having them fiscally limp into home ownership. For example: instead of providing down payment assistance for people who can barely afford to make ends meet, provide it for those who will have enough savings for 3-6 months expenses (after they buy the house) if they receive help with the down payment.

Although I’m against DPAs, I don’t think they will be completely eliminated. I do think that if the powers-that-be take Lee’s attitude towards reforming down payment assistance they could serve their intended purpose and get deserving individuals in homes.

The civil lawsuit asks for an unspecified amount of monetary damages and requests that the court require Countrywide to rescind or reform all the questionable loans it sold from 2004 through the present. The attorney general, Lisa Madigan, also asked that Mr. Mozilo contribute personally to the damages and that the court give her office 90 days to review loans serviced by Countrywide that were in foreclosure or soon would be.

“People were put into loans they did not understand, could not afford and could not get out of,” Ms. Madigan said. “This mounting disaster has had an impact on individual homeowners statewide and is having an impact on the global economy. It is all from the greed of people like Angelo Mozilo.”

The lawsuit adds to the considerable legal risks facing Bank of America as it prepares to absorb Countrywide in a takeover announced in January. Countrywide and its executives have been named as defendants in shareholder lawsuits, and the company’s practices are the subject of investigations by the Securities and Exchange Commission, the F.B.I. and the Federal Trade Commission, which oversees loan servicing companies.

I fully support the decision of the state’s attorney general to not only go after the company as a whole, but the money grubbing executives as well. It is high time that those in big business start treating their customers with some respect. Here’s hoping that this case will help the many people in Illinois who have suffered because of Countrywide’s predatory practices.

Seller-funded groups and supporters in Congress say that such programs should be regulated but not shut down, a proposal that HUD hasn’t shown much interest in in recent years. “If there’s a problem, let’s fix it,” says Rep. Gary Miller (R., Calif.), a vocal defender of the program and a former home builder and developer.

Whether or not DPAs will go away, the article concludes with a sure bet:

Rep. Frank said in an interview that he believed a compromise could be reached with the Senate that would preserve the program but with tougher lending requirements. “No one is talking about leaving it untouched,” he says.

The episode will be airing at 9 ET.

The dangers of zero down are assessed:

The biggest reason the FHA lost so much money was a scam called the “downpayment assistance program.” Under this program, builders or mortgage originators make a loan to low-income homebuyers, and then arrange for a third party to pay the downpayment, so the loan qualifies for FHA insurance. This means borrowers have no skin in the game, and in many cases have negative equity because the value of the homes are often inflated.

Borrowers could bet on the upside of the market at no cost to them. And thanks to the 100% FHA insurance against default, lenders were guaranteed full repayment whether or not the loan is ever repaid. Until recently, lenders even got a tax write-off for their “charitable contribution.” Everyone won – except the taxpayer. Now even the FHA finally agrees that this program invites widespread fraud and wants to end it. But Barney Frank, who heads the House Financial Services Committee, is insisting that it continue.

One lesson from the debacle is what happens with low or zero downpayment FHA loans: They go bust. The Government Accountability Office finds that default rates are about three times higher than on conventional loans. So why in the world is Congress promoting a new FHA bill to lower downpayments to 3% and in some cases even to zero?

Although I find the article to be a bit overly critical when it comes to the FHA program as a whole, I wholly agree with DPA and sub-prime issues.

CNNMoney.com reports today that the rule has been suspended for one year. The decision is based on the enormous number of foreclosed properties that are sitting empty and destroying market values. Hopefully honest flippers will take advantage of this suspension of the guideline and help revitalize many distressed neighborhoods.

The new HOPE NOW guidelines state that loan servicers should inform homeowners within 45 days whether their application for a workout — such as a repayment plan, loan modification or short sale — has been accepted or denied.

Servicers also agreed to re-subordinate second-lien loans if their position will not be worsened by a refinance or workout — potentially removing a major obstacle to preventing foreclosures in cases where borrowers have “piggyback” second loans. HOPE NOW servicers will also attempt to contact homeowners with subprime adjustable-rate mortgages (ARM) and other homeowners with ARMs that have a probable risk of default 120 days in advance of reset.

These new guidelines have been put in place to make HOPE NOW a more effective tool for distressed borrowers.