WASHINGTON — The federal and state banking regulatory agencies issued a statement yesterday advising mortgage services on loss mitigation.

The statement urged financial institutions that service securitized mortgages to review their authority under pooling and servicing agreements to identify borrowers at risk of default and pursue appropriate loss mitigation strategies with an eye toward preserving homeownership. "Significant numbers of hybrid adjustable-rate mortgages will reset throughout the remainder of this year and next. Many subprime and other mortgage loans have been transferred into securitization trusts that are governed by pooling and servicing agreements," the statement said. "These agreements may allow servicers to contact borrowers at risk of default, assess whether default is reasonably foreseeable, and, if so, apply loss mitigation strategies designed to achieve sustainable mortgage obligations. Servicers may have the flexibility to contact borrowers in advance of loan resets."

Appropriate loss mitigation strategies may include loan modifications, conversion of an adjustable rate mortgage into a fixed rate, deferral of payments, or extending amortization. In addition, the regulators recommended referring appropriate borrowers to homeownership counseling services to avoid foreclosure.