May 6 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke, seeking to end the worst housing slump in a quarter century, urged the government and mortgage lenders to intensify their efforts to avoid home foreclosures.
Bernanke, in a speech in New York yesterday, also reiterated his call for lenders to forgive portions of mortgages for some struggling homeowners. He said proposals should be ``tightly targeted'' at borrowers at greatest risk of losing their properties, and avoid providing an incentive for defaults.
The Fed chief also backed the idea of having the Federal Housing Administration refinance troubled mortgages, a concept included in Democratic legislation in Congress, without explicitly endorsing the bill. His remarks indicate a gap with the Bush administration, which has preferred to rely on industry-led efforts.
``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,'' Bernanke said in remarks to a Columbia Business School dinner.
House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, has sponsored legislation that would have the FHA insure as much as $300 billion in mortgages after loan-holders agree to reduce principal. The bill may come up for deliberation in the House this week after Frank's committee approved it May 1.
`Very Concerned'
Bernanke's comments seem to ``fit hand-in-glove with the legislation that Congress is going to bring out later this week,'' said Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, in an interview with Bloomberg Television. ``He's very concerned about housing, the subprime crisis spreading to the rest of the country.''
As the housing recession deepened, officials in Washington have offered a number of different proposals. Foreclosure filings rose 57 percent in March from a year earlier, according to Irvine, California-based RealtyTrac Inc.
``Conditions in mortgage markets remain quite difficult, and mortgage delinquencies have climbed steeply,'' Bernanke said.
Treasury Secretary Henry Paulson met with some of the largest mortgage servicers, including JPMorgan Chase & Co. and Citigroup Inc., on April 23 to consider ways to expand the scope of the Hope Now Alliance, a voluntary industry-led initiative he helped set up to reach more struggling borrowers and help modify their mortgages.
