Securitization, where home mortgages are repackaged into bonds that are then sold to investors, reduces the incentive of lenders to modify troubled home loans, Chicago Federal Reserve President Charles Evans said on Tuesday.

In remarks that focused on the country’s housing weakness and various attempts to ease it, Evans said efforts to modify home loans to prevent foreclosure where a drop in the bucket compared with the problem at hand.

"The securitization process appears to have created conflicts between the interests of servicers and lenders," Evans said. "These and other impediments have kept the number of modifications lower than we might have hoped."

The nation’s housing market has been in a rut for several years now, with home construction now hovering at less than a quarter of its boom-time peaks and prices down sharply across the country.

Many economists worry that, without housing as an engine of growth, the economy could take much longer than usual to recover.

Evans cast some doubt on the value of financial education in preventing mortgage and other borrower distress, a break from Fed tradition.

"Staff members at the Chicago Fed have recently undertaken a thorough review of studies evaluating the effects of financial education. What they find is that the evidence on the effectiveness of education and counseling is rather mixed," he said.

Still, he said some very targeted efforts could have a positive impact.

"The introduction of the mandatory counseling program significantly changed the behavior and performance of borrowers," he said.

"Specifically, fewer high-risk loans were originated because some lenders, concerned about having their mortgage terms scrutinized by counselors and being accused of predatory lending, chose to exit the market."