Federal Retreat on Bigger Loans Rattles Housing

by 12 May 2011
MONTEREY, Calif. - By summer's end, buyers and sellers in some of the country's most upscale housing markets are slated to lose one of their biggest benefactors: the deep pockets of the federal government. In this seaside community of pricey homes, the dread of yet another housing shock is already spreading. "We're looking at more price drops, more foreclosures," said Rick Del Pozzo, a loan broker. "This snowball that's been rolling downhill is going to pick up some speed."

For the last three years, federal agencies have backed new mortgages as large as $729,750 in desirable neighborhoods in high-cost states like California, New York, New Jersey, Connecticut and Massachusetts. Without the government covering the risk of default, many lenders would have refused to make the loans. With the economy in free fall, Congress broadened its traditionally generous support of housing to a substantial degree.



Is TILA-RESPA a good or bad thing long term?