Federal foreclosure relief programs like Hope Now and Project Lifeline are aimed at catching problems before they start. It's a little late for that.

Tensions are rising as the public tries to come to grips with the great sums of money being funneled into the financial markets to avert a crisis. While regulators are right to protect the integrity of the banking system, this provides little solace to the millions of Americans facing the loss of their homes.

The government, lenders and servicers are either too lazy, too incompetent or too deeply tied to Wall Street to set up a program that actually helps families. It's not hard to differentiate between a family and a speculator. Just follow the school bus on its morning rounds.

In order to qualify for federal support -- be it via Hope Now, Project Lifeline or the Federal Housing Administration (FHA) -- a homeowner must be current on his mortgage. Regulators proudly proclaim that, by limiting assistance to borrowers still keeping up, they're helping responsible families while teaching speculators a lesson. Their logic is fundamentally flawed. Worse yet, the people who need the most help are left out in the cold.

Speculators stopped making payments well before the government stepped in. By denying support to delinquent borrowers, relief programs leave thousands of families in the lurch. The only ones left hanging on are families trying to do the right thing by living up to their obligations.

I recently spoke with a mother of three in San Clemente, California. Both she and her husband work full-time and have been homeowners for 15 years. In August of 2006, the couple put 10% down on an adjustable rate mortgage from JPMorgan Chase (JPM) to buy a $750,000 home. At the time, 10% down was considered significant. They still should have never qualified for the mortgage, but lenders essentially ignored debt-to-income ratios during the boom.

Even though the interest rate is yet to reset, the monthly payments have become too much for the couple to manage. Meanwhile, the bursting of the real estate bubble means the home is likely worth less than $600,000. In reality, the home won't sell until long after a potential foreclosure is finished.

The couple has few options. Hope Now won't help, they don't qualify for an FHA loan and only after they wrote a letter to the Office of the Comptroller of the Currency did their servicer bother to call them back. Their credit is deteriorating; even the rental search is becoming bleak.

The mother explained, "No one in our community will lease their home to us, even with two full-time earners. It was okay to coach their kids for ten years in soccer, but God forbid a crisis comes up. No one wants to know or help you."

Not faced with the loss of the roof over your children’s heads, it's easy to say this couple made a mistake and should lose their home. Enter the federal government. According to Hope Now's website, the organization's mission is to:

Maximize the preservation of homeownership while minimizing foreclosures. Assist borrowers who have the willingness and wherewithal to remain in their homes, but need some help to do it. Our goal is to keep people in their homes and when that is not possible, prevent foreclosure.

The couple in question qualifies on each count. They want to keep their house, but need a lower payment to do so. But they're already behind on their mortgage and don't qualify for assistance.

Meanwhile, Congress and President Bush are rushing to pass legislation that gives tax breaks to banks and homebuilders - the very institutions that perpetrated this great fraud. Professor Zucchi noted last week:

In essence Minyans, you and I will give back to the Robert Tolls (TOL) and Ara Hovnanians (HOV) of the world millions of dollars to prop up their closely held companies. These individuals had the magic foresight to dump shares by the millions right before the whole Ponzi scheme collapsed.

Arguments rage about personal responsibility, but what's undeniable is that the politicians we elect to protect our best interests and their appointees are stealing from the poor to give to the rich. 

Federal Reserve Chairman Ben Bernanke had the gall to swear under oath that he supports a loan-by-loan solution to the foreclosure crisis. Meanwhile, the collected data and empirical evidence demonstrate that these programs don't achieve their stated goals.

Banks should be allowed to refinance underwater borrowers into new, affordable mortgages. The Fed should pick up the tab. It's already proven willing to trash the dollar to bail out Wall Street. It should offer the same support to individuals. The result would be a solvent banking system and families wouldn't lose their homes.

The longer we maintain this charade, the longer it will take to get back on track.