Mortgage rates are at their lowest level in more than 50 years, but stricter regulations and wary lenders are keeping potential buyers from taking advantage of the historically low rates.

Reacting to the easy availability of mortgages, driven in part by federal policies, federal regulators are tightening lending standards and imposing greater demands on banks to ensure the security of the mortgage.

One particularly onerous requirement comes from Fannie Mae and Freddie Mac. The two agencies buy loans from banks and lenders. However, to protect themselves and recover losses on bad mortgages, the two federal agencies are forcing banks to buy back bad loans at a loss to the banks in a practice known as “put back,’” the Wall Street Journal reported.

Banks have been asked to buy back $66 billion in mortgages that had been backed by Fannie and Freddie between 2006 and 2008. In order to reduce their put-back risks, banks are scrutinizing loan applicants in greater detail. Bankers say the demands by Freddie and Fannie are excessive, yet they have little choice but to react to protect themselves against future buybacks.

Lenders are “asking borrowing for reams of documentation — tax returns, bank statements, pay stubs, and appraisals — in order to deliver loans that can’t be questioned,” the Journal said. “Banks are asking borrowers to explain every deposit into their bank accounts over a few hundred dollars in order to verify that their assets are their own.”

Applicants are being turned down even with credit scores that once would have gained them a mortgage.

So while the Federal Reserve is trying to encourage homeownership by holding interest rates down, other federal policies and new regulations are doing the opposite.

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