Declining Values Put Many Who Took Out Home-Equity Loans in a Bind That May Worsen 

NEW YORK — Homeowners started losing hold of their homes years before spiking foreclosures and the housing slump slammed the economy.

Piece by piece, some gave away part of their homes by tapping equity to take cash out to pay for cars, weddings and vacations. Others never owned one brick. During the country’s most recent housing boom, the term “homeowner” threatened to become a misnomer as lenders offered 100 percent or more financing to some buyers.Now, slipping home prices could further erode the value of many Americans’ single largest asset, curbing consumer spending and jeopardizing retirement assets.Thanks in large part to mortgage-related tax deductions and a drumbeat of advice that everyone should own their home, the U.S. homeownership rate rose steadily in recent decades. It peaked at 69.2 percent in 2004 before backing down to 68.2 percent at the end of the third quarter last year, according to the Census Bureau, which has collected the data since 1965.

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Rates on 30-year mortgages dropped for a fourth straight week, reaching the lowest level in nearly four years and raising hopes that low rates will help spur a rebound in the hard-hit housing industry.

Freddie Mac reported Thursday that 30-year, fixed-rate mortgages averaged 5.48 percent this week, down from 5.69 percent last week.It was the fourth consecutive decline and the third straight week that rates have been below 6 percent. The new rate was the lowest for 30-year mortgages since they averaged 5.40 percent the week of March 25, 2004.Economists attributed the decline to further weak news on the economy combined with the biggest reduction of a key interest rate by the Federal Reserve in more than 20 years as it steps up its efforts to combat a threatened economic recession.”When the Federal Reserve cut the target for the federal funds rate by three-quarters of a percentage point, the action was extraordinary in both the magnitude and the timing of the rate cut,” said Frank E. Nothaft, chief economist at Freddie Mac.