The Federal Reserve has sent a 26-page white paper to Congress, which states several ways in which the government can help advance the recovery of the real estate market and overall economy.
In the paper, the Fed noted home prices have declined by roughly a third since 2007, which has led to a substantial distressed property inventory that has kept the housing sector weak.
The Fed stated in the report that less than half of lenders are offering mortgages to prospective borrowers with FICO scores lower than 620 and who can pay a down payment of 10 percent.
To increase lending and, in turn, homebuying nationwide, Bernanke said creditors must loosen their lending standards. Additionally, he recommended the conversion of many foreclosures into rental properties to help clear the inventory and likely raise home values.
"Restoring the health of the housing market is a necessary part of a broader strategy for economic recovery," said Federal Reserve Chairman Ben Bernanke.
A variety of measures are being considered to help the housing market and economy. The Wall Street Journal reports some members of the Fed want to eventually implement another round of quantitative easing to ameliorate the current economic conditions.