WASHINGTON (Bloomberg) — Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., said she doesn't support a national freeze on foreclosures.

Bair said on C-Span's "Newsmakers" programme that the processing of foreclosures needed to be reviewed after allegations some banks acted illegally to seize homes. Once the assessment was completed valid foreclosures should go forward, Bair said.

"It's tragic. I don't like it, but the market has to clear," Bair said. "If a family simply can't afford to make a modified payment, then something else has to happen. I regret it, but that's just the way the system has to work."

She said banks should do an internal assessment of the risk the issue poses to their balance sheets.

"We need to get a full handle on all of this," Bair said.

Attorneys general from all 50 states are conducting a joint investigation into whether lenders used false documents to justify foreclosures.