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Nearly a million homeowners have enrolled in President Obamas plan to modify mortgages. As of last month, only about 7 percent of them have received permanent loan modifications. And even that help may not be enough for an Arizona homeowner who spoke with NPRs Ted Robbins.

TED ROBBINS: Thad Salter sits at the dining room table in his home in Maricopa, Arizona. He sifts through a three-inch-thick pile of paper. Its a record of the long process to get a mortgage modification.

Mr. THAD SALTER: Just to kind of give you an example.

(Soundbite of banging, paper shuffling)

Mr. SALTER: This is a lot of stuff.

ROBBINS: Salter needed to lower his $2,300 monthly payment because he lost his job as a human resources exec, and with it, 40 percent of his family's income. His lender, Chase, offered to extend the mortgage from 30 to 40 years and lower the interest rate from 6.8 to 2 percent. That would cut his payment roughly in half, which makes his initial reaction to the offer seem bizarre.

Mr. SALTER: I call it extortion - you know, government-backed extortion, basically. I mean, who in their right mind looking at this would accept this? No one would. No one should.

ROBBINS: The mortgage modification solves a short-term problem: It allows Salter to stay in his home. But it doesn't address a long-term issue. Salter's mortgage is about $300,000. Today, his home is worth $125,000. He's underwater.

To keep the bank from taking a loss, the modification includes a $107,000 balloon payment before he can pay off the mortgage. So financially, Thad Salter says he feels like a hostage.

Mr. SALTER: I'm not going to gain $200,000 of value on this house. That's just not going to happen. You know, I think it's going to take a lot longer than that to even break even on this house, if ever.

ROBBINS: Salter decided to take the modification and stay in his home for a few years. But he still wonders if it would be better to walk away from the home and give it back to the bank. Many of his neighbors did. Fifteen of the 22 homes on his block went into foreclosure over the last couple of years.

Mr. SALTER: I'm not one of those who believes in that, but I've seen so many other people do that.

ROBBINS: Chase wouldn't comment for this story, and referred us to the Financial Services Roundtable, a banking industry association.

Spokesman Scott Talbott points out that walking away from a mortgage would bring down the Salters' credit rating. And he says if everyone did it, home values would go down even more. But mainly, Talbott says that homeowners who get modifications have an obligation to stay and pay.

Mr. SCOTT TALBOTT (Spokesman, Financial Services Roundtable): The borrowers have signed a contract. They have signed a promissory note, which says I promise to repay. So in addition to a legal obligation, you can argue there's a moral obligation to repay.

Professor BRENT WHITE (Law professor, University of Arizona): A contract is not a moral document. It's a legal document.

ROBBINS: Brent White is a law professor at the University of Arizona. He argues that there are good reasons for homeowners to break their contract. He says companies do it all the time, when it makes financial sense.

Mr. WHITE: So all this language about moral obligation in contractual obligations rest upon homeowners not understanding what a contract is.

ROBBINS: White's ideas have been criticized by the banking industry, former Treasury Secretary Henry Paulson, and at least one government-sponsored credit counseling agency. White says banks and the government aren't acting out of homeowners' financial interests. They're playing on their emotions.

Prof. WHITE: And for the bank, the rules of the game are make as much money as possible and use the fact that the homeowner is following moral norms to the bank's advantage.

ROBBINS: Brent White is not suggesting everyone walk away from their mortgage. Emotional attachment or the desire to remain in a neighborhood are good reasons not to.

Thad Salter even drove around his town of Maricopa looking at other houses before deciding to accept the modification, because he didn't want to disrupt his family.

Mr. SALTER: You know, I could care less about myself. But the kids I was more concerned about, and my wife.

ROBBINS: His struggle really emphasizes the modification program's purpose and weakness. It was set up to keep people in their homes, not bail them out of a mortgage which could be underwater for as long as it lasts.

Ted Robbins, NPR News.

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