Most of what James Theckston describes is familiar – the financial incentive (and pressure from his corporate parent) for lenders to sign up subprime borrowers, even to those who qualified for prime loans; the racial and ethnic biases exposed by preying on the weak or uneducated; the unfairness of bailing out those Wall Street banks and doing nothing for the homeowners whose lives were ravaged.

Banksters have figured out that they can stall real solutions to the housing/foreclosure mess and eventually the congress will give them some kind of back door bailout. They are probably right.

It was bad enough that the Feds stopped enforcing the law. Now they want the State Attorney Generals, including Eric Schneiderman of New York, to stop enforcing the law. But only as to banksters. Pot smokers are still fair game.

Keep in mind that we have a letter signed by Larry Summers, during the transition, saying that the Administration will undertake “reforming our bankruptcy laws” to help keep homeowners in their homes. And we have assurances delivered in writing to lawmakers like Donna Edwards and Jeff Merkley that they would take this up. All of this has gone down the memory hole now, but this was a fundamental promise, and they broke it. As a result, we have a program to help homeowners that it entirely voluntary on the part of the servicer, with predictable results.

At a press event in North Portland in front of the home of a family struggling to avoid foreclosure, Senator Jeff Merkley unveiled a six-part plan to fix the housing market and rebalance the relationship between borrower and lender. The plan includes what Merkley calls “lifeline bankruptcy,” which is basically the cramdown proposal to allow bankruptcy judges to modify the terms of primary residence loans.

Larry Summers made his swan song yesterday, and he didn’t give an inch. Speaking at the Economic Policy Institute, where he didn’t have a very favorable audience, Summers insisted that the actions of the Obama Administration were necessary and positive, and that the country was spared the worst expected effects of the Great Recession. The best outcome of that speech would be if it were the last one Summers ever gave. Or at least, the last one any respectable human would bother listening to.

One of the more amusing moments of yesterday’s House Financial Services Committee hearings on foreclosure fraud was when the representatives for the loan servicers were asked why they were subsidiaries of the large financial institutions. The link between the servicers and the big banks, mainly caused by a series of mergers, leads to all kinds of conflicts of interest, because it inevitably pairs them up with the originator or trustee of the loan. The servicers had no real answer to this question. Finally, the Wells Fargo representative claimed that it was for “customer convenience,” because some customers had their mortgage and their checking accounts at the same bank.

Everyone’s jaw dropped in the hearing room.

Now Miller is out with a letter, signed by all the top leaders of the House Financial Services Committee, that seriously ratchets up the demands on the Financial Stability Oversight Council. Among other things, it asks the FSOC to use its authority under Dodd-Frank to force the large financial institutions to divest from the loan servicers.

Both Felix Salmon and DDay are arguing that if the banks lower principal on some unspecified set of loans, it’ll fix the “mortgage mess.” Now, I agree that loan modifications are one of the things we ought to strive for to solve a number of our problems. But I’ve got questions about what they’re proposing.

I’m fairly amused by this story, presented by the NYT as “reporting.” It claims the Obama Administration has tried “just about every program it could think of to prop up the ailing housing market,” and faced with the failure of “just about every program,” economists and analysts are contemplating just letting the housing market crash. However there’s a false assertion — the Administration hasn’t tried everyting, including cramdown.

What the HAMP series shows in excruciating detail is that the current set of procedures to reduce foreclosures and keep people in homes just haven’t worked for the vast majority of borrowers at risk. But what can be done to reverse this trend and achieve the following goals: 1) help borrowers, 2) clear the market and return housing prices to a sustainable level and 3) mitigate the overall financial risk to the economy. These are the near-term crisis points for housing, what hasn’t been resolved by focusing on anti-predatory lending laws or the future of Fannie and Freddie. So what’s out there?