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Originally published Friday, November 4, 2011 at 5:00 PM

Homeownership rate near 13-year low

Stricter lending rules and concerns that prices will fall further are keeping some Americans from taking advantage of a 28 percent decline in home values since 2006.

Bloomberg News

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The U.S. homeownership rate in the third quarter was at the second-lowest level in 13 years as borrowers were evicted after foreclosures and the tightest mortgage standards in more than a decade thwarted new buyers.

The ownership rate was 66.3 percent, up from the 13-year low of 65.9 percent in the prior quarter, the U.S. Census Bureau said in a report Wednesday. It was the only gain in two years.

Stricter lending rules and concerns that prices will fall further are keeping some Americans from taking advantage of a 28 percent decline in home values since 2006, according to Richard DeKaser, deputy chief economist at the Parthenon Group, a Boston-based financial consulting firm.

Mortgage financiers Fannie Mae and Freddie Mac are increasing fees that banks pass on to borrowers. That's preventing some people from taking advantage of the low prices, he said.

"People view it as a good time to buy, but there's a risk aversion on the part of buyers and lenders," DeKaser said.

The ownership rate may decline next year as foreclosures turn into evictions. In December, the U.S. foreclosure rate rose to a record high, as measured by the Mortgage Bankers Association. Those cases may not come to a conclusion until next year. The average time between the first late payment and a repossession is 20 months, according to Lender Processing Services Inc. in Jacksonville, Fla.

Fannie Mae and Freddie Mac in April increased so-called risk premiums they charge lenders to guarantee most mortgages, assessed on top of its standard fees. For a borrower with a 698 credit score and a down payment of 20 percent on a $300,000 mortgage, the additional charges add more than $5,000 to the balance.

In addition, Fannie Mae charges an "adverse market" fee that adds $750 to the same-sized mortgage, according to its lender guidelines. Freddie Mac has similar charges. The fee applies even to borrowers who have FICO credit scores above 800, in a rating formula that ranges from 300 to 850.

About 28 percent of Americans have scores from 650 to 750, and 38 percent have scores above 750, according to Minneapolis-based Fair Isaac Corp., developer of the FICO system.

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