Fed chief: Give servicers more leeway to do workouts

With many homeowners "under water" on their mortgages, loan servicers need to make more permanent loan modifications -- including write-downs of principal -- rather than relying on temporary repayment plans, Federal Reserve Chairman Ben Bernanke said Tuesday.

Loan servicers are missing opportunities to engage in workouts that are in the best interests of both lenders and borrowers, Bernanke said, and investors could prevent foreclosures if they allowed loan servicers to act in their own self interests.

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