Fed Head Demands Action over Foreclosure Fears

Federal Reserve Chairman, Ben Bernanke has urged action from the government and mortgage lenders in a bid to stave off the threat of foreclosure to millions of households around the country.

In a 10 page speech delivered at the Columbia Business School in New York, Bernanke said conditions in the mortgage markets remained strained and posed a threat to the economy.

"The costs of foreclosure may extend well beyond those borne directly by the borrower and the lender. Therefore doing what we can to avoid preventable foreclosures is not just in the interest of lenders and borrowers. It's in everybody's interest."

Bernanke also reiterated his desire to have the Federal Housing Association (FHA) provided with 'greater latitude' by the Congress to help distressed borrowers at risk of losing their homes as well as the power to set appropriate standards for owners seeking to refinance mortgages and to adjust interest rates according to the level of risk of the applicants.

"Some 1.5 million U.S homes entered into the foreclosure process last year, up 53 percent from 2006, with the rate of new foreclosures likely to be higher this year." Bernanke said.

Bernanke also said that Fannie and Freddie "could do more" to mitigate the damage of the housing market downturn. He urged the two government backed enterprises to raise more capital, "which they will need to take advantage of these new securitization and investment opportunities, to provide assistance to the housing markets in times of stress, and to do so in a safe and sound manner." he concluded.