A high-ranking federal banking official thinks that new tax incentives and a change in bank examination policies could help lift the nation out of the housing slump that’s been putting the brakes on the economy. But the U.S. still faces a host of other challenges, according to some speakers at the New Jersey Bankers Association first Annual Economic Leadership Forum held at the Renaissance Woodbridge Hotel in Iselin on January 6

“The housing situation has helped to inhibit an economic recovery,” said William Dudley the event’s keynote speaker and president of the Federal Reserve Bank of New York. “It’s one factor behind the frustratingly slow economic recovery.”

Besides the employment hits that construction and other housing-related industries have experienced, falling home prices have drained consumers’ retirement-fund plans, with “more than $7 trillion in lost (homeowner’s) equity,” added Dudley, noting that more than 11 million households are estimated to be “underwater,” or have mortgage balances that are higher than the market value of the underlying home.

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“Tightened lending standards have presented obstacles to mortgage modifications,” he said.

He also slammed “excessively stringent” rules that drive banks to focus on only “least-risk” borrowers, leaving many people unable to qualify for a mortgage, further dampening the housing market.

Possible solutions might involve developing new kinds of mortgage debt that could be offered to borrowers “on reasonable terms,” he said, pointing out that borrowers today typically need credit scores of 760 or above “even though many would-be borrowers are often lower than that number.”

Further, depressed values have made it tougher to refinance loans, and have “undercut the ability” of monetary policy to boost consumer demand, Dudley noted.

“Increased refinancing would help spur the market,” he said. “And strengthening incentives for underwater borrowers who are current on their loans could help. I don’t want to return to the lax underwriting standards from the boom years,” he said. “But perhaps today’s tough underwriting standards should be reviewed.”

Another speaker outlined the unique challenges that the country faces as a result of the downturn.

“The recession officially ended in June 2009 when Gross Domestic Product started to expand,” according to James Hughes, dean of Rutgers University’s Edward J. Bloustein School of Planning and Public Policy, referring to the market value of all final goods and services produced by the U.S. “But more people believe in flying saucers than that the recovery is 31 months old.”

Unlike previous downturns, white-collar and “knowledge-based” jobs took hard hits, creating “more uncertainty,” he noted.

Despite recent signs of job growth, including a dip in the national unemployment rate to about 8.5 percent, “we’ve still got a deep employment deficit,” said Hughes. “From December 2007 to November 2011, the U.S. lost an estimated 5.9 million jobs. In New Jersey, cumulative losses were 185,500.”

The New Jersey recovery will continue to track the U.S., he said.

“But we remain vulnerable to external shocks that could quickly unravel our expectations,” according to Hughes. “It will likely take a significant time until a full recovery is achieved.”