More Videos
- China Overcapacity Worsening, EU Chamber Warns
- Investing in Good Karma – and Making a Profit
- Black Friday to Avoid Red Ink; Greenback Gets the Blues
- Bankruptcies Jump, Hitting Highest Level in Four Years
- Bank of America CEO Search May Extend Into 2010
- Steepest Black Friday Discounts, Revealed
- Fed to Counsel Moviegoers on How to Use Credit Cards
- 'Cancer of Fraud' Permeates Health Care System: Critics
- Where Do Pardoned Turkeys Go?
- 4 Thanksgiving Week Buys For Your Portfolio: Market Pros
- There's a 'Great Chance' For a Double-Dip Recession: Strategist
- Revenge of the Gangsta Nerds
- Will TCU See The "Flutie Effect?"
- Retail Earnings and Sales to Improve in Q4: Analyst
- Consumers Catching the Holiday Spirit
- It's Beginning To Look A Lot More Riskless
- Crescenzi: Claims Level Suggests End to Job Losses
- Hedge Funds Take Early Lead in Warren Buffett's 'Big Bet'
MOST SHARED
- The Executive Job Search
- Where Do Pardoned Turkeys Go?
- Chinese Overcapacity is Worsening, EU Chamber Warns
- US Mint to Suspend American Eagle Gold 1-Ounce Coins
- Salvation Army's Kettles Now Credit Card-Ready
- S&P Stocks Trading at New 52-Week Highs
- Activision Prepares to Double Dip on ‘Modern Warfare 2’
- Oil Friday
- Wal-Mart Price Pressure Hurts China Workers: Report
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
- For nearly three decades, these on-call experts have been dishing advice on how to – and not to – cook turkey.
- Eric Schmidt pledges to create a virtual copy of the Iraq National Museum at Google’s expense.
- Bill Griffeth is taking a leave of absence from CNBC and Power Lunch for a year. Here's a message from Bill.
- More shoppers than ever plan to comparison-shop this season. Who will benefit?
- It may be the most unusual guide to business you'll read.
- How can you get out of debt and back on the road to recovery? Follow these ten steps.
Data is a real-time snapshot *Data is delayed at least 15 minutes