"As foreclosures escalate, we are clearly falling behind the curve," Bair said in testimony prepared for the House Financial Services Committee.

However, she said, an FDIC proposal to create a guarantee program based on the mortgage-modifying interventions employed at IndyMac Federal Bank "could prevent as many as 1.5 million avoidable foreclosures by the end of 2009."

She also said the FDIC was working to streamline rules for the HOPE for Homeowners Act.

Although "still in the early stages of implementation … the program has the potential to provide relief to several hundred thousand homeowners," she said.

In the past two years, she said, there were 2.7 million foreclosures in the U.S., 1.5 million last year and 1.2 million in the first half of 2008.

"Foreclosure is a very lengthy, costly and destructive process that puts downward pressure on the price of nearby homes," she said.