(Corrects to Thursday from Friday in 8th paragraph)
By Karen Jacobs
ATLANTA, Nov 15 (Reuters) - The improving U.S. housing market is "far from being out of the woods," Federal Reserve Chairman Ben Bernanke said on Thursday, arguing that overly tight lending standards are part of the problem.
The Fed, which has focused on mortgage bonds in its latest round of asset purchases, will continue to do what it can to support the housing market, Bernanke said in a speech that avoided policy specifics.
A bubble in the U.S. housing market was at the core of the 2007-2009 financial crisis and brutal recession that continues to hamper the world economy. Data in recent months, however, have shown the sector is on the mend.
"Although there are good reasons to be encouraged by the recent direction of the housing market, we should not be satisfied with the progress we have seen so far," Bernanke told the Operation HOPE Global Financial Dignity Summit.
The Fed chairman noted that tighter credit standards were an appropriate response to the peak in house prices and the crisis the followed.
"However, it seems likely at this point that the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery," Bernanke said.
Earlier this year, the Fed had suggested other policymakers in Washington consider steps to free up credit and lift the housing sector. Critics on Capitol Hill, however, charged that the central bank should stick to formulating monetary policy.
In his speech on Thursday, Bernanke steered clear of offering any policy prescriptions as he detailed steps officials have already undertaken.
House prices have edged up nationwide this year, and there are also positive signs in residential investments, sales, demand and home-building sentiment. Housing usually leads the U.S. economy out of recession, but the vast equity losses have stymied the market this time.
Bernanke said Americans remain worried over the labor market, housing prices, and the economy in general, which in turn is keeping potential home buyers on the sidelines.
Unfortunately, problems in the sector are disproportionately affecting lower-income and minority communities, he added.
"For the first time in a number of years, the housing sector is improving, adding to growth and jobs," Bernanke said. "But the housing revival still faces significant obstacles, and the benefits of that revival remain quite uneven."
In September, the Fed unveiled a plan to buy $40 billion per month in mortgage-backed securities in part to unstick a housing sector that Bernanke called "a missing piston" in the U.S. recovery.
The U.S. central bank is relying on such market actions since its key interest rate, the traditional monetary policy tool, has been near zero since late 2008 to battle the Great Recession. (Reporting by Karen Jacobs; Writing by Jonathan Spicer; Editing by Neil Stempleman and James Dalgleish)