Bernanke Pushes for More Federal Efforts To Curb Home Foreclosures

May 6, 2008 10:40 a.m. EST

New York City, NY (AHN) - Federal Reserve chairman Ben Bernanke pushed for more efforts from the federal government and mortgage lenders to curb home foreclosures, which continue to rise.

He said lenders must condone parts of mortgages of struggling American homeowners and backed the call for the Federal Housing Authority to refinance problematic mortgages.

Bernanke, quoted by Bloomberg, said at a Columbia Business School event, "Realistic public- and private-sector policies must take into account the fact that traditional foreclosure-avoidance strategies may not always work well in the current environment."

The Federal Reserve chairman's recommendations are in line with a bill authored by House Financial Services Committee chairman Barney Frank that would have the FHA back up $300 billion mortgages after lenders agree to cut the principal. The bill is slated for discussion in the House this week.

Bernanke's call comes at a time when the banking and finance industries tightens credit further. A Fed survey said 70 percent of domestic lenders imposed harsher rules on home equity credit, while 50 percent made tighter terms for existing home equity loans.

The other indicators of tighter credit include tougher credit benchmarks for credit cards, lesser number of student loans approved, stricter lending terms for large and middle-market companies and tougher standards even for safer prime mortgages.

Bernanke added, quoted by USA Today, "Doing what we can to avoid preventable foreclosures is not just in the interest of lenders and borrowers. It's in everybody's interest."