WASHINGTON – Dec. 16, 2014 – Years after the bursting of the housing bubble, many consumers – particularly young borrowers and those who suffered a major financial setback during the Great Recession – have found it is difficult to qualify for a mortgage.

People who experienced a temporary job loss or a bad credit event, such as foreclosure or a car repossession, face an uphill battle getting a home loan approved in light of the higher downpayment and higher credit requirements put in place by the banking industry to avoid a repeat of the reckless lending that fueled the 2008 housing market crisis.

But the tighter lending standards have been a drag on the nation's housing market recovery, and mortgage giants Fannie Mae and Freddie Mac were set to institute new lending guidelines, effective Saturday.

"In America, we survive on housing. It represents such a large portion of the gross domestic product that we can't get back on track until we find a method to get millennials – that group of 25- to 35-year-old first-time homebuyers – back in the housing game," said Michael Sichenzia, owner of Blue Ocean Solutions, a Parkland, Fla.-based consulting firm for the housing and construction industry.

"The first-time homebuyer is the kindling for the housing market for the midlevel buyer to move up," he said. "The midlevel buyer can't move up unless they sell to first-time homebuyers. What happened is the pendulum swung so far to the right, making it harder for first-timers to get in."

The new standards will allow mortgage lenders to be more flexible with borrowers who have blemishes on their credit for one-time events, such as a job loss or a medical bill. It will also reduce the minimum credit score requirements.

Typically banks will not approve a mortgage for a borrower with a credit score below 660, but they will have the discretion to lend down to 620 under the new guidelines.