Putting the presidential squeeze on the mortgage firms

Filed in archive government entities on July 29, 2009

In his more than six months in office, Pres. Barack Obama has shown a willingness to fight hard for what he wants. And what he wants now — besides the passage of health-insurance reform — is for mortgage service companies to do everything they can to keep homeowners from losing their houses to foreclosure.

That's why last night, the Obama administration invited executives from 25 mortgage-servicing companies to the White House yesterday. Obama and his team wanted to put some pressure on mortgage-servicing firms to do more to rework the mortgage loans that homeowners are struggling to pay. More loan modifications equals fewer foreclosures, in the view of Obama and his administration.

According to a story in the Wall Street Journal, the Obama administration called on the mortgage company executives to approve 500,000 trial loan-modifications by November of this year. Under a trial loan modification, homeowners usually make three months of lower mortgage payments. If they do this, they can then generally qualify for a full loan modification. The steps can keep them from losing their home in foreclosure.

The federal government approved a foreclosure-prevention plan in February of this year. Mortgage servicers are now given financial incentives to reduce mortgage loan monthly payments to more affordable levels.

It's unclear, though, if the program is doing much to prevent foreclosures. Yes, there are apparently more than 200,000 loan modifications taking place now. But at the same time, the number of housing foreclosures across the country remains at record levels.

The Obama administration says that the foreclosure-prevention program can eventually help 3 million to 4 million homeowners stay in their houses.

If this is true, then the mortgage companies should do everything in their power to support the program. Foreclosures are a burden to banks and lenders. They're a blight, too, on communities. We should all support anything that reduces the number of housing foreclosures.