More Videos
- Job Market Politics to Keep Interest Rates Low
- AIG, Symbol of Crisis, Watches Its Stock Zoom Back
- Disney Profit, Sales Top Street Forecasts; Shares Jump
- Bill Gates Praises Apple's Jobs for 'Saving the Company'
- Cities With the Most Home Price Reductions
- Cramer: The Real Reason Stocks Fell Thursday
- Is Euphoric Market Ignoring Warning Signs?
- Video Game Sales Plunge, but Have They Hit Bottom?
- Despite Rhetoric, Obama Has Few Options to Boost Jobs
- Microsoft's Bill Gates Praises Apple's Steve Jobs For 'Saving the Company'
- Gold Is a Bad Inflation Hedge—Like Oil: Stock Picker
- Intel's Andy Bryant Offers An Explanation
- US 'Actively Working' on Weaker Dollar: Fund Manager
- Options Boil on Biotech Buyout Rumors
- Warren Buffett's $100,000 Offer and $500,000 Advice for Columbia Business School Students
- Activision Blizzard's "Modern Warfare 2" Sales Break Records
- 5-Star Manager's 5 Stocks for Changing Markets
- What's The Forecast from Retailers? Proceed With Caution
MOST SHARED
- Warren Buffett and Bill Gates Share Their 'Optimism' With Eager Columbia Business Students
- Pharma & Social Media
- Cities With the Most Home Price Reductions
- China Fourth Quarter Growth Could Hit 10%: Official
- Warren Buffett's $100,000 Offer and $500,000 Advice for Columbia Business School Students
- Disney Profit, Sales Top Street Forecasts; Shares Jump
- Microsoft's Bill Gates Praises Apple's Steve Jobs For 'Saving the Company'
- Housing Recovery 'Still In Uncharted Territory': HUD Secretary
- Despite Rhetoric, Obama Has Limited Options To Boost Jobs
- Is Euphoric Market Ignoring Warning Signs?
Text Size 
Federal Reserve Chairman Ben Bernanke called Tuesday for additional action to be taken to prevent more distressed homeowners from falling into foreclosure.
 |
Pablo Martinez Monsivais Federal Reserve Board Chairman Ben Bernanke. |
Even with some relief efforts under way by industry and government, foreclosures and late payments on home mortgages are likely to rise "for a while longer," Bernanke warned.
Rising foreclosures threaten to worsen the problems in the housing market and for the national economy, which many fear is on the verge of a recession or in one already.
"Reducing the rate of preventable foreclosures would promote economic stability for households, neighborhoods and the nation as a whole," Bernanke said. "Although lenders and servicers have scaled up their efforts and adopted a wider variety of loss-mitigation techniques, more can, and should be, done," the Fed chief said.
One of the suggestions Bernanke made was for mortgage and other financial companies to reduce the amount of the loan to provide relief to a struggling owner. "Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding deliquency and foreclosure," Bernanke said.
With low or negative equity in their home, a stressed borrower has less ability -- because there is no home equity to tap -- and less finanical incentive to try to remain in the home, he said.
Bernanke acknowledged this idea might be a tough sell to lenders. Lenders, he said, are reluctant to write down principal. "They said that if they were to write down the prinicipal and house prices were to fall further, they could feel pressured to write down principal again," Bernanke said.
Still, Bernanke suggested such longer-term permanent solutions may work better than shorter-term and temporary ones, where the distressed homeowner could find himself in trouble again. "When the mortgage is `under water' a reduction in principal may increase the expected payoff by reducing the risk of default and foreclosure," he said.
Print
Email
- Warren Buffett and Bill Gates spoke to Columbia students, and Buffett made the students a startling offer.
- They may have wrecked their companies or saved our economy. Tell us what you think.
- Big pharma embraces social media, but how much should a tightly regulated sector say on Facebook or Twitter?
- A European dating site finds lovelorn singles from one country to be consistently uglier. Which is it?
- Contributor David Pogue looks at two of the latest efforts to perfect the digital pocket camera.
- PepsiCo is ramping up its onsite health facilities for workers.
Data is a real-time snapshot *Data is delayed at least 15 minutes