Fed leader urges lenders to pitch in

ORLANDO, Fla., March 4 (UPI) -- U.S. Federal Reserve Chairman Ben Bernanke told bankers in Orlando, Fla., "more can, and should be done" to help homeowners through the mortgage crisis.

"Efforts by both government and private-sector entities to reduce unnecessary foreclosures are helping, but more can, and should, be done," he said.

He said principal reductions to help borrowers "have been quite rare," with the typical intervention involving a reduced interest rate.

"The preference by servers for interest rate reductions could reflect familiarity with that technique, based on past experiences," he said. But, "with low or negative equity," he said, if a homeowner wants to remain in the home "principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency or foreclosure."

Bernanke called for "a vigorous response" that included lender cooperation.

"Servicers could accept a principal write down by an amount at least sufficient to allow the borrower to refinance," he said, suggesting lenders create arrangements that allow recovery of principal by sharing in future appreciation of the home.