WASHINGTON — The pace of loan modifications on adjustable subprime mortgages is lagging, which could prompt regulatory action on the mortgage industry, U.S. Federal Deposit Insurance Corp. Chairman Sheila Bair warned Thursday.

“Unfortunately, at this point, the available information seems to show that foreclosures continue at an unacceptably high level while true loan modifications are lagging,” Bair said in prepared testimony to the Senate Banking. “It is important that servicers demonstrate and document real progress soon or they invite regulatory and legislative action to supplement the industry’s actions.”

Citing an increase of more than 60 percent in foreclosures during the first three quarters of 2007 from a year earlier, Bair said mortgage servicers need to act more quickly to prevent a bigger wave of defaults over the next two years.

Read the rest of the Associated Press Story here