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RENEE MONTAGNE, host:

This is MORNING EDITION, from NPR News. Good morning. I'm Renee Montagne.

LINDA WERTHEIMER, host:

And I'm Linda Wertheimer.

As we look back at some of the bigger stories of 2010, the trouble in the housing market is one that's been with us from beginning to end. The housing market started the year flat on its back. And as the year draws to a close, it's not doing much better.

NPR's Chris Arnold reports.

CHRIS ARNOLD: Home sales are still slumped. Home-building remains around a 50-year low, and prices are still down around 30 percent from their peaks.

Part of the problem this year has - clearly - been high unemployment. But also, the ongoing foreclosure crisis keeps glutting the market with unsold homes. And the government's effort to prevent foreclosures over the past year was a pretty big disappointment to many people.

Ms. DEBRA DAHLMER: I was afraid of losing my home. I was afraid of being on the street. I was afraid of my mom being on the street. I panicked, I guess.

ARNOLD: Retiree Debra Dahlmer has lived in her home in Gloucester, Massachusetts, for most of her life. Her 80-year-old mother lives downstairs. Most of the family over the years worked at the nearby Gordon's frozen fish processing plant.

But back in 2008, Dahlmer's husband passed away. She never actually missed a mortgage payment, but she could see that she was running out of money and would soon fall behind.

Ms. DAHLMER: I just found that when the life insurance was gone and the medical expenses, you know - I am a diabetic, I do have issues - I just couldn't do it.

ARNOLD: Dahlmer has some guaranteed income because she's legally blind and gets disability payments. And she appears to be a perfect candidate for President Obama's foreclosure-prevention plan. That plan was supposed to help 3 to 4 million Americans keep their homes. But the plan has reached only a small fraction of that. And you can see one reason why here: Dahlmer's been trying to get a more affordable mortgage through the plan for a year now, working through her lender, Bank of America.

Ms. DAHLMER: I thought a big business was supposed to know what they're doing.

ARNOLD: Like many other homeowners, Dahlmer says she's been tearing her hair out - in faxing in proof-of-income and tax documents and other paperwork, only to have the bank lose the paperwork. For her, that's especially hard to deal with since she has to read with a magnifying glass pressed tight against her face. She's been asking call-center workers for a year now what's going on.

Ms. DAHLMER: Well, I'm sorry; you haven't sent in the documentation. I says, yes I have. I read her the fax number that I had sent it to, the date. She says, that isn't what we need. I says, this is what you've asked for.

ARNOLD: Dahlmer says she's been getting all kinds of foreclosure-related junk mail, and she's quite scared about losing her home.

Ms. DAHLMER: I worry about my mom. Where would my mom go? She's 80 years old. Where would I go? I'm told by my doctor to calm down because my blood pressure is skyrocketing from this. How can you help it?

ARNOLD: After NPR contacted Bank of America, they now say that they're looking into Dahlmer's case, and hope to resolve it within a few weeks.

But federal oversight panels have been criticizing the U.S. Treasury Department this year for not imposing better oversight of all the major banks. Many have been having these same problems, and hundreds of thousands of homeowners are falling out of this federal program.

Dr. MARK ZANDI (Chief Economist, Moody's Analytics): The foreclosure-modification effort has been a real mess. It's a very difficult problem. But even considering that, it just hasn't gone well.

ARNOLD: Mark Zandi is chief economist of Moody's Analytics. He thinks, though, despite all of these problems, the housing market is finally approaching a turning point.

Dr. Zandi: Well, housing hits bottom in 2011. It's been a five-year road south. But I think 2011 marks the end of that crash.

ARNOLD: Another big issue for the housing market this year was access to credit. Interest rates have been very low, by historical standards. But many people can't qualify for those low rates.

Mr. BRIAN CHAPPELLE (Mortgage Consultant): To me, this is one of the variables that we have to correct.

ARNOLD: Brian Chappelle is a mortgage consultant. He thinks the pendulum has swung too far, and lenders are being too tight-fisted. One problem, he thinks, is that the government-backed entities Fannie Mae and Freddie Mac have been in a wrestling match with the major banks, forcing them to buy back loans that have gone bad. He says that's got the banks nervous, and less willing to make new loans.

Mr. CHAPPELLE: That's sort of the battle we're in right now between Fannie Mae and Freddie Mac, and lenders of all sizes.

ARNOLD: Another thing on the to-do list for 2011: Congress will be debating what to do with Fannie Mae and Freddie Mac. Right now, the government's using them to prop up the housing market, but all sides want to see a major re-shaping of the government's role in housing.

Chris Arnold, NPR News.

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