Besides being a “central” player in causing the current economic crisis, the housing sector continues “to inhibit a broader recovery,” and the softness is “likely to persist for some time,” according to Federal Reserve Board governor Elizabeth A. Duke.

“In particular, we have entered a cycle where high levels of default on mortgage debt have led to a reduction in the availability of mortgage debt as well as a tightening of terms for it,” she told the Global Association of Risk Professionals, according to a text of her speech released by the Fed. “This situation has led to lower levels of home sales and prices paid for homes, which, in turn, contributes to yet more defaults by borrowers.”

In addition to fiscal and monetary stimulus to improve employment, and federal support for housing finance, Duke said, the foreclosure problem must also be addressed directly, considering distressed borrowers who can avoid foreclosure through loan modification, borrowers who will be unable or unwilling to sustain their mortgages even with loan adjustments, as well as those who are still successfully meeting their mortgage obligations.

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