Gaming The Obama Mortgage Rescue

Some borrowers may be lying to get help, while shady loan mod shops are ripping off distressed homeowners.

In his 25 years as a real estate agent, Jim Klinge has seen plenty of borrowers try to work the system, especially in subprime-scourged North San Diego, where he works and lives. Like many in his industry, he says the Obama administration's $75 billion loan modification plan is giving rise to another bout of fraudulent mortgage activity. "With all certainty, it's being gamed," he says.

Under the president's program, if a borrower is deemed in "imminent default," the lender and Uncle Sam will rework the mortgage by lowering interest rates, stretching out the payback term or lowering the principal to reduce the monthly payment to less than a third of the borrower's current income.

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