Fed chief: Keep foreclosures at bay

Ben S. Bernanke said the private sector is incapable of coping with the foreclosure crisis on its own. (Bloomberg News)

WASHINGTON - Federal Reserve chairman Ben S. Bernanke yesterday urged using more taxpayer funds for new efforts to prevent home foreclosures, saying the private sector is incapable of coping with the crisis on its own.

The Fed chief outlined four possible options, including buying delinquent mortgages and providing bigger incentives for refinancing loans. He called for addressing the "apparent market failure" where lenders aren't modifying mortgages even in cases where it's in their own economic interest to do so.

Each option would require "some commitment of public funds," Bernanke said, underscoring his position that the central bank alone can't revive the economy through its interest rate cuts and emergency lending programs. The Republican's stance may also put him in line with President-elect Barack Obama, who said Wednesday that "we've got to start helping homeowners in a serious way."

"More needs to be done," Bernanke said in a speech to a Fed research conference on housing and mortgage markets in Washington.

"Policy initiatives to reduce the number of preventable foreclosures should be high on the agenda."

The government could buy "delinquent or at-risk mortgages in bulk," then refinance them through the federal Hope for Homeowners program, Bernanke said. Congress could also help reduce loan rates and lender insurance premiums, he said.