If servicing and processing problems continue to bog down foreclosures, there should be a way to permit "necessary and justified" foreclosures to continue, according to FDIC chairman Sheila Bair.
The Federal Deposit Insurance Corp. chief said foreclosures should continue to be processed where the properties are vacant or the homeowner has been unable to make his payments even after the servicer reduced the monthly payment by at least 25%.
Such a solution could "triage" the foreclosure mess that "ultimately could be very damaging to our housing markets," Bair said at a joint FDIC/Federal Reserve Board conference on foreclosures.
The agency has regulatory authority over all of the nation's top 10 ranked servicers with the exception of one. Together, these firms control about 70% of the market, according to National Mortgage News.
She noted that all stakeholders involved in the foreclosure process need to come together and work out a solution.
"The regrettable truth is that many of the properties in foreclosure are vacant or occupied by borrowers who cannot make a significantly reduced payment and have been in arrears for an extended time," Bair said.
