With Fannie Mae (FNM) and Freddie Mac (FRE) releasing a plan to step up modification of home loans held by financial companies, the Chairman of the Federal Deposit Insurance Corp. weighed in to express support of the plan.

FDIC Chairman Sheila C. Bair said, "This is a step in the right direction but falls short of what is needed to achieve widescale modifications of distressed mortgages, particularly those held in private securitization trusts. We will not be able to stabilize the housing market until we correct skewed economic incentives which lead to unnecessary foreclosures. As we lend and invest hundreds of billions of dollars to help institutions suffering leveraged losses from defaulting mortgages, we must also devote some of that money to fixing the front-end problem: too many unaffordable home loans

We are pleased that the protocols announced today draw from the loan modification metrics we have instituted at IndyMac. However there are questions that remain about implementation. These include allowing extended amortization prior to interest rate reductions, whether payment increases are capped for the life of the loan, the use of higher interest rate caps, and sufficiently granular reporting to determine compliance and results."