Federal Reserve Governor Elizabeth Duke said the economy is strengthening as credit conditions improve in most areas expect the mortgage market. 

"The economy does seem to be strengthening — particularly the housing market seems to be recovering at this point," Duke said. "House prices are going up" though a lot of that has to do with a shortage of houses on the market."

She added, "Credit issues seem to be receding, and banks’ credit portfolios seem to be getting stronger and stronger and the delinquency ratios, non-performing asset levels seem to all be going down. So things seem to be going in the right direction there."

However, the mortgage market is one exception to a general picture of easier credit conditions, the Fed governor noted.