The U.S. Senate just voted to eliminate $35 million in legal aid to struggling homeowners trying to keep their roofs overhead. The move was done as a money saving device in order to meet government spending caps while agencies including Freddie Mac and Fannie Mae are dealing with record numbers of foreclosures fueled by the now infamous mortgage meltdown. HuffingtonPost.com has stated that the move is only one "casualty of Washington's increasing bipartisan push to cut spending across the board", and unfortunately it is expected that the long term effects of the decision will end up costing taxpayers more in the long run.

This recent blow to consumers has come despite increased reports of fraudulent mortgage practices by big lenders. Earlier this year it was discovered that many lenders had taken illegal short cuts in regards to following the stages of foreclosure proceedings. By law, lenders are required to manually (and thoroughly) review all documentation before putting a home into foreclosure status. Investigators unearthed information indicating that "robo-signers" (AKA unskilled employees with no legal training in regards to foreclosure proceedings) were instead charged with the task and erroneously caused thousands of individuals to lose their share of the American Dream.

Where Was $35 Million Coming From

Prior to the bad news being released by the government, some politicians simply forgot about the allotment. The $35 million fund was part of the Wall Street Reform Bill signed into law by President Barack Obama in the summer of 2010. At the time of the laws passing, the deal was accredited with being the largest overhaul of the existing American financial system since the New Deal took effect in the 1930s.

The bill is officially dubbed the Dodd–Frank Wall Street Reform and Consumer Protection Act and included changes to the existing bill, including the creation of the Consumer Financial Protection Bureau. Additionally, the act allotted $35 million for the U.S. Department of Housing and Urban Development (HUD) to establish legal assistance for foreclosure-related issues. The Senate never took the proper steps of allocating the funds, and instead the money was officially cut from the budget.

How Legal Aid Could Have Helped

This unfortunate news is the latest blow to consumers struggling with improper foreclosure paperwork. The money in question was originally going to provide consumers with skilled lawyers in order to fight improper foreclosure proceedings. When the bill was originally passed, the impact of the robo-signing activity was not yet known and the money was originally allotted to help individuals fight, just in case. Despite the new knowledge in regards with the problems plaguing the mortgage system, the Senate has voted to trim this fat from the budget, leaving tormented homeowners in dire straits. In response to the budget cuts combined with the newest foreclosure crisis, house Democrats are proposing new regulations to the current system.

Failure of HAMP

The Home Affordable Modification Program (HAMP) was launched under the Obama administration as a lifeline for consumers fighting to keep their homes out of default. Unfortunately, the limitations of HAMP, including lack of instructions, organization and implementation have capped the effectiveness of the initiative. It is estimated that only 25 percent of the government's targeted audience benefited from the option (HuffingtonPost.com). Instead, millions of homeowners were improperly denied the loan modifications and refinancing crucial for success. Sources report that overall the system was filled with problems including lenders charging illegal fees and ill-process evictions.

Because of the problems plaguing all of the homeowner assistance programs implemented by the government that financial experts have suggested that consumers try to conquer the problems of avoiding foreclosure on their own. Some strategies they suggest is working directly with one's mortgage holder in order to materialize a short sale or taking the time to work with a new private lender to refinance existing mortgages with lower monthly payment responsibilities. The industry's premiere mortgage rate origination tool, Mortgage Marvel, can help mortgage seekers with the latter by providing up to the date mortgage rates information without having to deal with a mortgage broker (and their potentially hidden agendas).