The head of the FDIC says the government can use its new emergency authority from Congress to help struggling homeowners overhaul mortgages by giving banks an incentive to modify the loans.

Sheila Bair, chairman of the Federal Deposit Insurance Corp., has been urging that the government do more to help tens of thousands of home borrowers avert foreclosure. She suggested in prepared testimony to Congress Thursday that could be done by having the government set standards for modifying mortgages into more affordable loans and providing loan guarantees to banks and other mortgage services that meet them.

Bair's proposal came in testimony she readied for a Senate Banking Committee hearing.