WASHINGTON, DC- In an effort to help jumpstart the housing recovery and revitalize the economy, the Obama Administration today announced it is taking several steps strongly backed by U.S. Senator Jack Reed to reduce foreclosures and improve the Home Affordable Modification Program (HAMP). 

The Administration will extend HAMP for an additional year, through 2013, and improve as well as expand it to reach more Americans who need help.  Additionally, the U.S. Treasury’s principal reduction program will be extended for loans insured or owned by the government-sponsored enterprises (GSEs). 

“This is a positive step.  A well-crafted and well-implemented principal reduction program should help underwater homeowners, prevent foreclosures, and improve the housing market,” said Reed, who has been urging the Obama Administration to take bolder steps to bolster the U.S. economy by offering help to the 11 million homeowners in the United States who owe more on their mortgages than their houses are worth.

“Acting FHFA Director DeMarco said he is willing to reconsider principal reduction for mortgages backed by Fannie and Freddie, if, in his words: “a source of funds outside the Enterprises emerge to cover some portion of the costs associated with reducing principal.”  The Administration has now made those funds available.  I expect FHFA to promptly reconsider their analysis and help more Americans avoid foreclosures,” stated Reed.

According to CoreLogic, a data research firm, about 23 percent of U.S. homes currently have negative equity totaling nearly $700 billion.  Core Logic reports that 48,950 properties in Rhode Island had mortgages that were underwater in the 3rd quarter of 2011, which represents 21.4% of Rhode Island mortgages.  And since 2006, the drop in housing prices has wiped out about $7 trillion worth of household wealth.

“We need to gain traction in the housing market so we can see a sustainable economic recovery.  Reducing foreclosures is a smart investment that will help minimize the devastating impact foreclosures continue to have on our communities,” concluded Reed.