* Post-crisis bank caution hurts mortgage lending
* Bernanke sees no quick change in lending practices
* Future of home-mortgage financing system murky
By Glenn Somerville
May 10 (Reuters) - Banks have become so restrictive in making mortgages that many worthy home buyers are being frozen out of the U.S. housing market, and lending practices are not likely to loosen any time soon, Federal Reserve Chairman Ben Bernanke said on Thursday.
Speaking via satellite to a banking conference in Chicago, Bernanke highlighted ongoing problems in mortgage finance availability, even though banks are much healthier now as the 2007-2009 financial crisis has receded.
"To be sure, a return to pre-crisis lending standards wouldn't be appropriate," Bernanke said. "However, current standards may be limiting or preventing lending to many creditworthy borrowers."
Lax lending practices, including "liars' loans" handed out to borrowers who provided little or no documentation for jobs and incomes, have been cited as a key contributing factor in precipitating the severe financial crisis.
Bernanke implied the backlash by banks against criticism of their lending practices, which now are far tighter, might be overdone and will be extremely hard to reverse.
"Many factors suggest this situation will be difficult to turn around quickly, including the slow recovery of the economy and housing market, continued uncertainty surrounding the future of the government-sponsored enterprises, the lack of a healthy private-label securitization market, and cautious attitudes by lenders," Bernanke said.
Overall, Bernanke said, home mortgage credit outstanding at banks has contracted about 13 percent from its peak.
The government-sponsored enterprises - Fannie Mae and Freddie Mac - are key vehicles in home-mortgage finance because they buy mortgages originated by banks and package them into securities that they resell to investors. The practice frees up funds for banks to make new mortgages.
But Fannie Mae and Freddie Mac had to be bailed out by the government and were taken over at the height of the crisis. The government is considering options that include possibly winding them down, leaving it unclear what type of housing finance system eventually will emerge in future.
U.S. Housing Secretary Shaun Donovan told Reuters on Thursday he believed that 10 to 20 percent of potential home-buyers who could adequately carry the debt were being "locked out" of the market because credit was either not available or was available only at a restrictive price.
"We had risk-amnesia going into the crisis and I think now we've gone a bit too far in the other direction," he said.
Bernanke said Fed surveys show that even when home buyers can make a 20 percent down payment, banks are often reluctant to offer mortgage money to any but the best qualified.
"Most banks indicated that their reluctance to accept mortgage applications from borrowers with less-than-perfect records is related to 'putback risk' - the risk that a bank might be forced to buy back a defaulted loan if the underwriting or documentation was judged deficient in some way," he said.
Recent Fed surveys on credit conditions have found that, years after the crisis, banks remain worried about hangover from the bursting of the housing bubble and now also fear strains from the ongoing European debt crisis.
Loan officers said they were less willing now than they were five years ago to lend to anyone except those with stellar credit.
On the positive side, Bernanke said the banking system generally is in much stronger condition, with more capital on hand and ample liquidity, so that as recovery gains traction and generates more credit demand it will be in good shape to expand lending that is necessary for stronger growth.