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“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.

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Fed officials have been outspoken about the need for government policy to help the market for single-family homes. This view has brought the Fed into a clash with congressional Republicans, who have argued that market forces should be allowed to work.

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“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.

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when money is lent to these folks and they can no longer afford the payments

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Politicians creating rules on finance is akin to hospital janitors performing brain surgery.

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“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.

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Politicians creating rules on finance is akin to hospital janitors performing brain surgery.

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he is saying that the standards went from too loose to too tight

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This is right.

But it's not the fault of the banks. Congress has mandated it.

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The Fed’s survey of senior loan officers shows that lenders began tightening mortgage credit standards in 2007 and “have not significantly eased standards since,” Bernanke said.

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At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency. We will continue to monitor this situation closely.

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frick Dave Ramsey and his "never use credit" theory.

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The 61-year-old machine operator at a plastics factory bought a $170,000 house in Moreno Valley this summer that boasts laminate-wood floors and squeaky clean appliances. He got the four-bedroom, two-story house despite a pockmarked credit history. The last time he owned a home, Maldonado refinanced four times and took on a second mortgage. He put a Cadillac and Mercedes-Benz C300W in the driveway and racked up about $45,000 in credit card bills and other debts. His debt-fueled lifestyle ended only when he was forced into bankruptcy. His reentry into homeownership three years later came courtesy of the Federal Housing Administration. The agency has become a major source of cash for so-called rebound buyers — a burgeoning crop of homeowners with past defaults who otherwise would be shut out of the market.

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