President Obama has made a public call for mortgage lenders and servicers to provide struggling homeowners with longer-term modifications and principal reductions when it fits the situation.
Referring to the American taxpayers' bailout of the banking system, which the president described as probably the most unpopular thing the government has ever done, Obama said, ""[W]e were there for you when you got into trouble, then you've got to be there for the American people when they're having a tough time.""
President Obama held a town hall meeting at the Newseum in Washington D.C. Thursday which was broadcast on CBS' ""The Early Show."" The president took a question from a woman in the audience who explained that her mortgage modification expires in January of
2012, and even with good credit, she can't refinance the house because she owes more than it's worth.
""[W]e want to see if we can get longer-term loan modifications. And in some cases, principle reduction, which will be good for the person who owns the home, but it'll also be good for the banks over the long term,"" President Obama said.
Under the government's Home Affordable Modification Program (HAMP), borrowers receive reduced payments for a period of five years. Some proprietary programs from banks provide a shorter timeframe for modified payments.
""[Y]ou know what,"" Obama said, ""speaking to the banks...you're going to be better off if somebody's still paying on their mortgage than if they get foreclosed on and you end up not only having to go through all those legal processes, but you also end up...selling the home at a fire sale price.""
Obama acknowledged that ""some banks have been better than others"" at providing sustainable solutions to ensure borrowers can stay in their homes. ""But we've got more work to do,"" he said.
Obama noted that his administration is working with lenders to expand loan modification programs to reach more people. ""[W]e're going to be talking to the banks. And I mean, on a regular basis,"" he said.
The president described the housing market as one of the ""biggest headwinds on the economy right now.""