New Jersey Governor calls for foreclosure action

New Jersey Governor Jon Corzine speaks in his office in Trenton, New Jersey, December 4, 2008.

TRENTON, New Jersey (Reuters) - New Jersey Governor Jon Corzine said on Thursday that preventing the foreclosure of home mortgages should have been a major focus of the federal government's bailout package and must be a major priority going forward.

Foreclosure prevention "should have been the focus of the bailout," Corzine said in an interview with Reuters.

"A large part of our efforts should be focused on that," he said.

Corzine said that the foreclosure crisis could be eased by a national policy of modifying mortgage loans that have become distressed.

That could be achieved by reducing interest rates, reducing principal, or extending the term of a loan, he said.

Corzine said that bankruptcy laws should be changed to allow judges to mediate between mortgage borrowers and lenders and that the mediation process should be mandatory in any foreclosure filing, as it is in a trial program currently taking place in New Jersey.

There should also be a requirement that anybody receiving money from the $700 billion federal bailout fund known as TARP should undergo mediation, he said.

U.S. foreclosure activity rose 25 percent in October from a year ago, the latest month for which data are available, according to Irvine, California-based research firm RealtyTrac.

Foreclosure filings -- default notices, auction sales notices and bank repossessions -- rose by 5 percent from September to 279,561 in October, the firm said.

Credit Suisse said Thursday it expects U.S. home foreclosures to climb to 8.1 million in the next four years, up from a previous forecast of 6.5 million, warning of a "subprime society" as economic weakness and falling home prices take a larger toll on homeowners.

Corzine was this week selected by the National Governors Association to head up its efforts to deal with the foreclosure crisis and said he will be delivering a speech on the subject at the National Press Club in Washington on Monday.

The Democratic governor said that he believes the incoming administration of Barack Obama is "sympathetic" to his proposals on foreclosure policy. But he was unaware of any specific initiative being pursued by the new administration.

Corzine also welcomed a speech by Federal Reserve Chairman Ben Bernanke on Thursday in which Bernanke called for an increased effort to stem the tide of foreclosures.

Corzine also called for a consistent national policy on foreclosure prevention amid a number of initiatives including legislation introduced by Pennsylvania Senator Arlen Specter, an initiative by the Federal Deposit Insurance Corp and a number of state and local programs.

"The Federal government is the only place where you can create consistency," he said.

(Additional reporting by Ciara Linnane; Editing by Diane Craft)