Federal Reserve Chairman Ben Bernanke announced Tuesday the need for federal and state authorities to start taking meaningful steps to help homeowners avoid foreclosures, as the foreclosure rate index continues to rise across the nation.

Bernanke addressed the fact that many states, including Florida, the site of his speech, are gearing up their efforts to help homeowners avoid foreclosures through raising awareness of homeowner options when faced with a default. In many cases, homeowners who are served with notices of default are completely unaware of what to do, and being unable to pay off their debt, they accept foreclosure as an inevitability, and the situation spirals out of control. Before they know it, many homeowners are walking right into foreclosures, losing their homes and having their credit ruined without even putting up a fight.

The truth is that many homeowners simply don’t understand their options, and this is the main way in which public and private institutions have worked to help homeowners avoid foreclosures up until this point.

But Bernanke urged Tuesday that more needs to be done to battle the rising tide of foreclosures that is devastating the housing market and contributing to the onset of an economic recession. He also warned that much of what has already been accomplished to avoid foreclosures won’t take root in a meaningful way for some time. With many more adjustable rate mortgages, the main culprit in homeowner defaults, set to adjust during 2008, foreclosures and defaults are predicted to continue rising well into the year. This has been evidenced already, as foreclosures in January of 2008 rose 8% from the previous month, and are nearly 60% higher than they were one year ago.

While Bernanke praised some efforts by mortgage companies, banks and other lenders to work with homeowners, he stressed that more drastic measures may be needed, such as a principal reduction in the debt owed by homeowners. By lowering the amount owed on the loan, it will bring the mortgage closer to the actual property value of homes, which have bottomed out in most regions of the country, leaving homeowners paying the inflated prices from the housing boom of the earlier part of the decade. This would also restore some equity to the homeowner, which Bernanke stressed would lower delinquencies and avoid foreclosures.

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