ObamaAdministration

Back in 2007, a relatively unknown Harvard Law professor named Elizabeth Warren warned that "for a growing number of families who are steered into...risky subprime mortgages...trust in a creditor turns out to be costly." In the months after the housing crash, Warren became a very public beacon of reason -- it's no wonder she is now considered the lead candidate to head the new Bureau of Consumer Financial Protection, created by the financial bill he signed last week. Republican lawmakers and many mortgage bankers are leery of what they perceive to be Warren's anti-bank rhetoric, but many Democratic leaders and consumer advocates praise her "enormous credibility," as Treasury Secretary Timothy Geithner put it.

Good intentions count, but cash is definitely better. The Treasury Department reported that fewer borrowers are receiving permanent mortgage modifications through the Obama administration's program to aid troubled homeowners. Some 530,000 homeowners, or 40 percent of 1.3 million enrolled in the HAMP program, have had their reduced mortgage payments terminated. Participants are expected to contribute a third of their income to monthly payments. The main reasons borrowers are dropped include incomplete paperwork, missed payments and an inability to meet income and debt requirements.

Last week, with the help of a special $1.5 billion Obama administration fund for the states most devastated by property price declines and foreclosures, the state of Michigan launched its own program for unemployed borrowers who are having trouble paying their mortgages.

Unlike the federal Home Affordable Mortgage Program, Michigan is hoping to offer the one thing proven to help borrowers avoid foreclosure: cash payments, combined with principal reductions. Unemployed borrowers can get up to $750 month cash to help make mortgage payments, and up to $15,000 in principal reductions on mortgage debt.

There's just one problem: According to the Detroit Free Press, the nation's biggest lenders are not yet on board.

Amid rising foreclosures and public outrage over taxpayer-funded handouts to banks, the Obama administration is trying to put some teeth into its program to help ailing homeowners.

The Home Affordable Modification Program (HAMP), announced in February, dangled financial incentives to banks and mortgage servicers willing to lower mortgage payments for borrowers facing foreclosure. At the time, the administration said it hoped HAMP would modify mortgages for 3-4 million homeowners over a period of three years. To date, almost 651,000 homeowners have had their mortgages lowered on a trial basis, through the program, according to government data.