Many of those who lost homes to foreclosure hope that because the phenomenon has grown into a sign of the recessionary times, mortgage lenders will be more forgiving about the blotch on their credit history.
But that may be too optimistic. Robert Satnick, chairman of the California Mortgage Bankers Association, said he doubts that the mortgage industry will soon forget the lesson that lax lending, such as what was practiced during the housing boom just a few years ago, can lead to disaster. New, stricter rules are likely here to stay.
"Given everything we have learned in the mortgage industry over the last 18 months, my estimate would be the guidelines will stay the same and not get looser," Satnick said.
A homeowner who loses a house to foreclosure will have to wait at least five years to be eligible to get another mortgage, Satnick said, citing Fannie Mae guidelines that most lenders use. Also, the applicant must have re-established a credit score of at least 620 and not have been late on any other mortgage, rental or credit card payments in that span.
Mason Gaffney, professor of economics for 32 years at UC Riverside, said he believes foreclosures "will turn a lot of owners into tenants, maybe for the rest of their lives," and an enlarged renter population will strengthen the labor movement and prompt people to seek greater security from the government, just as they did as a result of the Great Depression.
Another UC Riverside economics professor, Richard Sutch, said he does not expect such a lasting impact unless the current recession lingers a lot longer.
In that case, he said, it could have "a profound impact" on young adults planning their lives. In an era of high unemployment, he noted, the responsibility of owning a home, which anchors the owner to a specific location, becomes a liability.
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