UPDATE 2-Fed's Duke-tight credit still holding back housing

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By Mark Felsenthal

WASHINGTON Dec 10 (Reuters) - Lenders stung by the financial crisis are still holding back on extending credit, impeding a recovery in the housing market, Federal Reserve Governor Elizabeth Duke said on Thursday.

"Even taking into account the excesses of the bubble period it appears that lenders have now tightened underwriting terms so much that the lack of credit availability is at least partially an impediment to homeownership," she told a Federal Reserve Bank of Chicago conference on housing finance.

The Fed made her comments available in Washington.

Duke did not comment on the broad outlook for the economy or interest rates in her speech.

Housing finance markets need a clear signal about the future shape of government-backed mortgage finance enterprises Fannie Mae FNM.N FNM.P and Freddie Mac FRE.N FRE.P before private mortgage markets can recover, Duke said.

Fannie Mae and Freddie Mac were for-profit corporations that benefited from government lines of credit that led markets to assume the government would stand behind their obligations if they ran into financial difficulties.

The government placed the companies into conservatorship during financial market turmoil last year and has had to pump tens of billions of dollars into them to prop them up.

"Whatever is the ultimate future for Fannie and Freddie, market participants will need to see a clear roadmap for both the individual institutions and the role of government in housing finance before private markets can begin to map a course for themselves," Duke said.

The collapse of overinflated housing markets played a big role in the financial crisis as mortgage defaults sank the value of assets around the world.

President Barack Obama's administration said it will propose early next year what to do with Fannie Mae and Freddie Mac.

U.S. mortgage delinquencies remain high, triggered by job losses and home value declines, Duke said. Fed purchases of mortgage-backed securities issued by government-sponsored enterprises have helped lower mortgage rates, she said.

The backlash against risky lending has choked off a lot of appropriate lending, Duke said.

Future models for channeling investment funds into housing markets will likely include simplified structures for securities and more information about what is in them, she said. Securities will benefit from being standardized as much as possible, she said.