Bernanke: Fed is Tackling Foreclosures

March 14, 2008— -- WASHINGTON (AP) -- Fighting to stem a dangerous wave of home foreclosures, Federal Reserve Chairman Ben Bernanke pledged Friday to do all that is possible to help struggling U.S. homeowners.

The Fed is "strongly committed to fully employing our authority, expertise and resources to help alleviate their distress," Bernanke said in a speech to the National Community Reinvestment Coalition's annual meeting here.

Record-high foreclosures are aggravating problems in the housing market and for the U.S. economy, which many fear is on the verge of a recession or in one already.

Bernanke did not offer new recommendations -- as he did earlier this month -- but rather spoke of the various steps the Fed already is taking to address current problems and to prevent another crisis of this sort.

The Fed, for instance, has proposed a rule to protect homebuyers from some of the same dubious lending practices that contributed to the housing and credit debacles now shaking the country. Subprime borrowers -- those with tarnished credit histories or low incomes -- have been hurt the most, although problems have spread to more creditworthy borrowers.

"Far too much of the lending in recent years was neither responsible nor prudent," Bernanke said. "The terms of some subprime mortgages permitted homebuyers and investors to purchase properties beyond their means, often with little or no equity," he added. "In addition, abusive, unfair or deceptive lending practices led some borrowers into mortgages that they would not have chosen knowingly."

At the end of last year, more than one in five of the roughly 3.6 million outstanding subprime adjustable-rate mortgages were seriously delinquent -- meaning they were either in foreclosure or 90 days or more past due. That rate is about four times higher than it was in the middle of 2005, he said.

The meltdown in the housing and credit markets are not only straining homeowners but also have forced financial companies to rack up multibillion losses. The situation has unhinged Wall Street, put the Federal Reserve and the Bush administration in crisis-management mode, rattled the public and sent politicians -- including those vying to be the next president -- scrambling for solutions.