More people are renters rather than homeowners because in spite of the 33 percent drop in home prices since 2006, they cannot afford to purchase, or cannot qualify for financing. The next years will continue in the same vein. This will place more stress than ever on a weak economy. However, policy in Washington does attempt to keep people from losing their homes to foreclosure. President Obama encourages lenders to refinance mortgage loans to be repaid at lower rates. The lending institutions rebel against the idea since it reduces their income from interest. They hesitate to refinance Fannie Mae and Freddie Mac loans.
Dealing with refinancing is difficult. Unless the individual qualifies for HARP, it is not likely refinancing will be possible. Eight million Americans now owe more on the mortgage than they can get by selling the home. Refinancing is now nearly impossible unless guaranteed by Freddie Mac, Fannie May or the Federal Housing Authority. Fees for the refinancing have increased, putting the solution out of reach of many families.
Refinancing is further complicated by second mortgages. High credit ratings are necessary plus two years of tax returns, assets and proof of income. Foreclosures were postponed and then curtailed in an attempt to keep people in their homes. They decreased in 2011, with the third quarter seeing the lowest number since 2007.
It is a buyer’s market in single family homes. However, people are not buying at a sufficient rate. Homeownership declined to 66 percent and the median price of the single family home is 33.5 percent lower. People who lose their homes, or who cannot afford to buy them in the first place, must rent the place where they live. They become renters out of necessity.