Although regulatory policy will be important for restoring a fully functioning housing and mortgage market, the strength of the overall economic recovery is crucial as well. Obviously, loss of employment or income makes it more difficult for families to pay their mortgages, maintain good credit histories, refinance their mortgages at lower rates, and avoid foreclosure.
People who are worried about their jobs are understandably more reluctant to purchase homes, and households who have suffered hits to their incomes face difficulty qualifying for a mortgage and saving for a down payment. Concerns about the financial strength of households and about the economic recovery also make lenders more cautious.