By Kevin Drawbaugh and John Poirier
WASHINGTON (Reuters) - A top U.S. banking regulator warned mortgage service firms on Tuesday to get moving on relief for distressed homeowners or face a legislative backlash that could include handing over the job to bankruptcy judges.
With the subprime mortgage crisis worrying markets and fanning fears of recession, Federal Deposit Insurance Corp Chairman Sheila Bair urged companies that manage mortgages to make good on their promises to help people avoid foreclosure.
"There's no good reason not to be modifying these loans... It needs to get done," Bair told the Reuters Regulation Summit in Washington.
U.S. home foreclosures totaled about 1.1 million in the first three quarters of 2007, up 60 percent from the previous year, Bair told lawmakers last week.
The Bush administration has announced an industry plan aimed at temporarily freezing introductory, or teaser, rates for five years for some subprime borrowers.
Bair, whose agency insures deposits and some retirement accounts at thousands of banks, said she expects that mortgage loan modifications will increase.
"I do expect it to pick up," Bair told Reuters. "The (industry) plan was really not put into place until January, so I think those protocols will help."
Under a bill being considered in Congress, bankruptcy judges would be allowed to erase some mortgage debt -- a proposal opposed by bankers who argue it would unsettle markets and increase borrowing costs. Continued...
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