After recently creating a program to save troubled mortgage and finance banks, the Treasury Department and the Federal Deposit Insurance Corp. (FDIC) are officially working on a plan that takes aim at the foreclosure crisis underpinning current economic turmoil. Under the powers of the new Emergency Economic Stabilization Act awarded to the Treasury Secretary, the joint effort is creating a proposal to curb “avoidable” foreclosures.

“The FDIC is working closely and creatively with Treasury to realize the potential benefits of this authority,” said Sheila Bair, chairwoman of the FDIC before the Senate Banking Committee Thursday.

She also gave some examples of the team’s brainstorming efforts.

“Loan guarantees could be used as an incentive for servicers to modify loans,” Bair said. “Specifically the government could establish standards for loan modifications and provide guarantees for loans meeting those standards. By doing so, unaffordable loans could be converted into loans that are sustainable over the long term.”

Bair has had experience in streamlining mortgage modification procedures recently, when the failing home loan lender IndyMac was taken into conservatorship by the FDIC. She created a standard process to modify loans that were delinquent by 60 days or more.  Under this program, roughly 40,000 of the 60,000 loans on IndyMac’s books would qualify for modification help.

“Through this week, IndyMac Federal has mailed more than 15,000 modification proposals to borrowers and has called many thousands more in continuing efforts to help avoid unnecessary foreclosures,” Bair said. “While it is still early in our implementation of the program, over 3,500 borrowers have accepted the offers and many more are being processed.”

According to the Chairwoman, the IndyMac loan modifications have saved borrowers an average of $380 on their monthly mortgage payments.

Although she recognized that not all homeowners will be able to refinance and save their homes under the available programs, Bair emphasized that “minimizing foreclosures is important to the broader effort to stabilize global financial markets and the U.S. economy.”