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Fed chief: Give servicers more leeway to do workouts

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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. The tone of Bernanke's remarks to the Independent Community Bankers of America at their annual convention in Orlando, Fla., differed markedly from a speech delivered by Treasury Secretary Henry Paulson Monday. Paulson said the Bush administration's foreclosure prevention efforts -- including a voluntary initiative in which loan servicers are freezing the rates on some adjustable-rate mortgage (ARM) loans -- are working, and that there is no need for a governm...