President Barack Obama wants banks to step up their efforts to help struggling borrowers stay in their homes by offering principal reductions, extending short-term modifications, and lengthening existing mods.
"We want to see if we can get longer-term modifications and in some cases principal reductions, which would be good for the person who owns the home but also be good for the banks over the longer term," the President said Thursday morning on a CBS-TV Town Hall broadcast.
The government's loan modification program, Home Affordable Modification Program or HAMP, provides payment reductions for five years, while many proprietary programs offered by the megabanks have shorter terms.
The president noted that the banks should allow modifications to continue if the borrowers are making their regular payments. "How do the banks benefit if the house goes into foreclosure?” he questioned.
Obama reminded the audience that banks received billions of dollars in government aid when they were in trouble. Now, these very same banks must “be there for the American people when they are having a tough time."
He mentioned that his administration is working with Congress to expand loan modification programs.
The housing market, along with gas prices, is the "biggest headwind on the economy right now," the President said