Federal Reserve Chairman Ben Bernanke said credit conditions in the United States are looking up across the economy, but mortgage lending remains constrictive as the nation searches for clarity on the regulatory front.

The Fed chairman said mortgage credit in the U.S. has fallen 13% from peak levels, and the slow recovery is likely to continue as long as the market is uncertain about the future of the government-sponsored enterprises. Other factors include cautious lenders and the absence of a robust private-label securitization market.

Bernanke said financing conditions in the commercial real estate market also remain squeezed with the sector troubled by high vacancy rates, falling property values and the poor quality of already existing loans.

The commercial mortgage-backed securities market also is struggling to get back to normal activity levels, Bernanke said.

The Fed chair said banks have made "considerable progress in repairing their balance sheets and building capital." The 19 largest banks went through the 2009 stress tests and ended up proving they had more and better-quality capital compared to a few years ago.

"Conditions in the banking system — and the financial sector more broadly — have improved significantly in the past few years. Banks have strengthened their capital and liquidity positions. The economic recovery has facilitated the rebuilding of capital and helped improve the quality of the loans and other assets on banks' balance sheets. Nonetheless, banks still have more to do to restore their health and adapt to the post-crisis regulatory and economic environment."