It looks like bailout watchdog Elizabeth Warren is not afraid to tell our emperors that they are not wearing any clothes. "The program that Treasury has designed does not have the scope, the scale, or the permanence needed to deal with the foreclosure problem," she said Tuesday night on a conference call to reporters about her Congressional Oversight Panel's December oversight report.

The Obama Administration's Home Affordable Mortgage Program (HAMP) has performed much better than the abysmal Hope For Homeowners initiative rolled out in 2008 under the Bush Administration that HAMP replaced, but only 20% of all eligible borrowers are in the trial stage of the loan modification process.  

Warren’s comments also included a wide ranging forecast of the future, with an estimate of 7 million to 13 million new foreclosure starts expected in the next five years. In a country with an estimated 129 million housing units, those numbers are reminiscent of Depression era statistics.

Ideally, in making a meaningful effort towards relieving homeowners in distress, any reduction in a borrower's payment through granting a lower interest rate should be coupled with a reduction in the borrower's mortgage principal. Doing so, however, would have a great impact on the banking industry's balance sheets.

The same politics that make it possible to rescue a banking industry on the brink of collapse is the same politics that make it hard for the federal government to devise a plan to help a substantial number of individual homeowners avoid the same fate. Add to that a corporate world whose very language allows it to describe negative events in a positive manner, and you can end up with a heavily subsidized banking industry who nevertheless insist that its delinquent borrowers lack any "personal responsibility" for their situation.  

The complexity of a mortgage transaction makes it extremely hard to institute anything approaching a FEMA style emergency loan effort that relies on reduced documentation to speed up the relief process. As a former mortgage loan officer, I remember reading the Hope For Homeowners guidelines when they originally came out. They were more stringent than the guidelines we followed to get most of our FHA loans approved. The challenges described by Chase Mortgage Senior Vice President Molly Sheehan at a congressional hearing seem to say the same thing me and my co-workers discovered.

Hiring Elizabeth Warren as the nation's town crier for the interests of the middle class was a good move by the Obama Administration. But in this environment, with political capital at a premium, can the White House afford to make the kind of politically risky decisions it will take to make a significant impact on the foreclosure crisis? Is it possible to take advice from some of the very people everyone blames for putting the country's homeowners into this position in the first place?  

"Cash For Clunkers" was easy. "Moolah For Mortgages," by contrast, is going to really test whether or not change has come to Washington.