FDIC Chairman Sheila Bair on Thursday suggested that the government guarantee mortgages as a means of avoiding foreclosures, a move that could help banks and homeowners.
Bair told the Senate Banking Committee that the Federal Deposit Insurance Corp. is working with the Treasury to establish standards for modifying loans and providing guarantees for loans that meet the standards.
“By doing so, affordable loans could be converted into loans that are sustainable over the long term,” she told lawmakers.
Meanwhile, former Federal Reserve Chairman Alan Greenspan, who testified before a House panel, predicted the financial crisis would get worse before it gets better. Greenspan described the crisis as a “once-in-a-century credit tsunami.”
Foreclosures Up Sharply
Earlier in the day, a new report showed that homeowners are, indeed, in need of help. U.S. foreclosure filings soared 71 percent in the third quarter compared with the same period in 2007, data released by RealtyTrac Inc. showed.