The idea that borrowers alone are responsible for the current mortgage meltdown is not believable. Huge numbers of borrowers were entrapped by lenders upon whom they relied, lenders who had no obligation to get the best rates and terms for borrowers.

“Correct me if I am wrong,” writes Prof. Bornstein, “aren’t we now involved in a massive effort to save these borrowers from foreclosure?”

Sure, you’re wrong. We are now involved in a massive PR campaign to shift blame from lenders to borrowers and to do nothing to change the system which allowed lender abuse and borrower cheating.

As to actual efforts to save troubled borrowers, they are extremely limited. As Moody’s reports, “Despite much industry dialog and heavy press attention on the topic of loan modifications as a mitigation technique to avoid foreclosure and reduce losses on defaulted loans, the survey results suggest that on average subprime servicers have only recently begun to materially increase the number of modifications as it relates to interest rate resets. Specifically, the survey showed that most servicers had only modified approximately 1% of their serviced loans that experienced a reset in the months of January, April and July 2007.”

There is a massive effort to save Wall Street firms and investors, but as to borrowers — as Borat might say — not so much. A 1 percent solution is hardly impressive, or impressive at all.

“We’re starting to see foreclosures on people who have credit scores of 750 and a family income of $150,000,” he says. “It’s not the person, it’s the loan.”

My response is that it’s not the loan…it’s the person! This quote represents the best example for the need to “monitor” our financial health in order to avoid failure. It’s not the loan..its the person’s awareness of financial literacy. This quote is further proof that even high income earners with high FICO scores may fail. In fact, we are now seeing that PRIME borrowers are also going into default. This makes my point that we all need FL awareness…but not simply FL education..We need to test our financial health and identify weaknesses in time for correction. The problem is that people don’t even realize that they are “financially ill” until they have slipped down the slippery slope towards financial distress. They have no idea that they are in trouble until it is too late. Try this analogy….Even though we take vitamins, do exercise, eat healthy, and do the right things…nevertheless, we still take an annual blood test to see if we are actually ,in fact, healthy. By the same taken…we also have financial blood that should be tested to see if we are “financially healthy”. Research has proven that we can test our Personal Financial Blood and determine financial weaknesses in time for correction. I will venture to state that anyone making $150,000 annually and having a FICO score of 750, also needs an annual Personal Financial Blood test to see if they are in fact financially healthy. Financial distress can be avoided. That is why I propose that everyone, especially the Subprime Borrower, be given this web-based guidance in order to help avoid future defaults..even after loan modification. If it can happen to the high income high FICO score individual…it can happen to the subprime borrower. Correct me if I am wrong…aren’t we now involved in a massive effort to save these borrowers from foreclosure? I must stress that along with loan modification, we make a deal with the subprime borrower to accept guidance to help him/her stay on-track and avoid future default and foreclosure. We now have that opportunity..let’s recognize that the subprime borrower can use this guidance..and so can we all. I have spent a great deal of time and effort researching how we can save subprime borrowers from losing their homes to foreclosure. I am passionate about this solution to the Subprime Mortgage Crisis, and I am certain that it will work. I believe that loan mods and refinancing as proposed by the new Treasury Dept initiatives called HOPE NOW will not work unless we also help the subprime borrower “monitor” his/her ability to be able to repay the mortgage..now and tomorrow.

Can you think of ANY changes which lenders should make in the way they originate and underwrite loans? If so, what are they?