Federal Reserve Chairman, Ben Bernanke, today revealed during a televised speech that the foreclosures and mortgage defaults will continue to climb “for a while longer,” according to a Yahoo!News.com article.

Bernanke called on lenders and servicers to do more to help distressed homeowners avoid foreclosure, suggesting that the financial institutions consider reducing individual loan amounts.

Here’s a snip:

“Although lenders and servicers have scaled up their efforts and adopted a wider variety of loss-mitigation techniques, more can, and should be, done…. Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure.”

It’s a plan that Beranke himself admits might not go over too well with lenders. In fact, he reveals that the lenders feel a move like this, in the long-run, could become something of a slippery slope with them writing down mortgages over and over if homes prices continue to slide.

Unfortunately, when housing prices fall it opens up the possibility that some homeowners will become “upside down” or “under water” with their homes, meaning they owe their lenders more money than the homes are actually worth.

That’s bad news according to Beranke, who feels that with no home equity to tap it will give distressed homeowners less financial incentive to try to remain in the home.

Already, the Bush administration has attempted to stunt the number of foreclosures with rate freezes on adjustable loans. However, that alone appears not to be enough.

Only time will tell, unfortunately, how this entire situation plays out. But if Beranke is correct, and more foreclosures are headed for the open market, then it’s best to keep your eyes peeled.

That’s because it more than likely means that lenders will be more eager than ever to unload their foreclosure inventory, which means better deals for you overall.