NEW YORK – The Federal Reserve is keenly interested in the housing market and has been analyzing housing and mortgages, Federal Reserve Board Governor Elizabeth Duke will tell the Senate Tuesday morning.

Housing and its financing are factors the Fed considers when “formulating monetary policy, regulating banks, and protecting consumers,” Duke said, according to prepared text of her testimony, which was released by the Fed. “In particular, the failure of the housing market to respond to lower interest rates as vigorously as it has in the past indicates that factors other than financial conditions may be restraining improvement in mortgage credit and housing market conditions and thus impeding the economic recovery.”

She said the Fed has “actively” tried “to understand the reasons behind the impairment in housing and mortgage markets and the tradeoffs involved in designing policies that would remove obstacles to normal market functioning.”

Noting the Fed’s paper on housing, which was the basis of her testimony, Duke said it offers no “recommendations for any specific policy actions, [but] it does lay out a framework for discussion by outlining some options and tradeoffs for policymakers to consider.”

The current recovery has not seen the unleashing of “pent-up demand” related to improving conditions and lower interest rates. Part of the problem is the housing market was a cause of the recession.

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