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In 2010, the housing market was hit hard as the U.S. struggled to emerge from the worst economic downturn since the Great Depression. House prices declined, there was an abundance of homes for sale, and mortgage rates dipped to lows that hadn't been seen in decades.

Now, though, the market is still struggling, and mortgage rates on are on the rise. What can you expect in 2011?

Here are eight key factors to watch:

1. The new Consumer Financial Protection Bureau will start operating. By July 21, the structure to promote what may be a sweeping overhaul of mortgage products, processes and disclosures will be put in place. Elizabeth Warren, charged with creating the structure of the new bureau, is expected to have much of the framework in place for the new regulatory body by the official July start date. By that time, a director will have been named and regulators and regulations drawn from other bodies will be assembled.

It seems likely that mortgage disclosure reform will be first on the list for the bureau to tackle. Confusing, unclear and seemingly conflicting documentation has been implicated in the mortgage-market mess, and a push for more explicit yet simpler forms for consumers to review and sign are thought to be a top priority for the new body. That said, a simplification of the document stream has long been a dream of any number of regulators, with an exhaustive study completed just a few years ago with limited results. The change in 2010 to the Good Faith Estimate to make fees charged to borrowers more explicit was helpful to a degree, and trying to revise required Real Estate Settlement and Procedures Act and Truth in Lending Act documents will surely be an even greater challenge.

2. Fannie Mae and Freddie Mac will change . . . maybe. Reforming the government-sponsored enterprises (GSEs) has been an on-again, off-again, on-again crusade for the last couple of administrations. To be sure, it's a love-hate relationship; the GSEs have totally distorted the mortgage market, but without them, there would be no mortgage market to distort. They have eaten tens of billions of taxpayer funds but remain perhaps the key support for millions of homebuyers and homeowners. In such a fragile market, making immediate, substantial changes could have many unwelcome consequences. Reforming these entities is a thorny issue, to be sure.

After having been kicked down the road three times by the Obama administration, recommendations for change are expected to come from the Treasury Department in January. But will reform follow quickly? Probably not. There has been some talk of perhaps a five-year wind-down plan for the GSEs, some discussions of separating their "public" function of securitizing mortgages from their "private" investment portfolios, and both have proved useful to politicians at various times.

No matter what the proposals say, we expect long and contentious debate between Democrats and Republicans over the role of government in housing finance markets. If the housing market can begin a small but steady recovery, the companies' losses will start to ease and possibly reverse, and so any delays in making changes argue in favor of the status quo. We think that if there is no real progress toward reform made by perhaps October, it is very likely that GSE overhaul won't happen until after the next presidential election. We're betting on little if any real change in 2011.

3. The economy improves. If you want to know what will happen to mortgage rates in 2011, watch what happens to the economy. As we write this, the economy has put in about six quarters on the positive side of the economic ledger, and Federal Reserve stimulus and the recent tax agreement seem likely to ensure that growth continues on an upward track in 2011. The labor market recovery should continue to gain momentum as the year progresses, but unemployment will remain stubbornly high for perhaps years to come.

That said, continual but gradual improvement seems likely. As the economy finds firmer footing, so will mortgage rates. After being pressed to 56-plus-year lows in 2010 by various crises, deflation concerns and government manipulation, we may see a bit of the other side of the coin in 2011. Although the Fed will keep short-term interest rates low, it is unlikely to leave them at emergency levels forever; as the economy recovers, the market will probably demand that the Fed begin to raise short-term interest rates and back off on policy "accommodation" in order to avoid an inflation problem.