UPDATE 1-Mortgage servicers need more outreach-Fed's Kroszner

(Adds detail from speech)

LAS VEGAS, Feb 4 (Reuters) - Federal Reserve Governor Randall Kroszner said on Monday that mortgage servicers need to quickly invest more in identifying borrowers threatened by foreclosure and that lending reform would boost investor confidence in the nation's mortgage markets.

Mortgage service companies that manage a homeowner's monthly payments do not yet have the capacity to reach all troubled borrowers, Kroszner said in prepared remarks to the American Securitization Forum in Las Vegas.

"Servicers must undertake the investment to overcome the capacity challenges and provide transparent and timely measure of results," he said.

Kroszner did not comment on the economic or monetary policy outlook in his speech.

He said a plan to reform future mortgage lending would instill confidence in investors who have been rattled by recent housing woes.

Under the Fed's proposed reform of the Home Ownership and Equity Protection Act, the regulator would have sweeping authority to control mortgage lending practices.

Subprime borrowers would have their annual mortgage costs collected as part of their regular monthly payments and more proof of income and assets would be required to win a loan, under the reform pitched by the Fed. The draft proposal is open to public comment until April 8.

"Effective consumer protection can help to restore confidence in the mortgage markets and help to preserve the flow of capital to consumers who wish to purchase a home," Kroszner said, addressing the trade group meeting of about 6,000 Wall Street dealers and bond investors eager to help stabilize a bond market thrown into a tailspin by soaring defaults on U.S. mortgages. (Reporting by Al Yoon, Writing by Patrick Rucker; Editing by Chizu Nomiyama)