Federal Retreat on Bigger Loans Rattles Housing (and how this affects home sellers)

We have been consistently driving home the fact that NOW is the time to buy.  There are changes coming soon that will affect loan amounts and may close opportunities for some who need that extra leverage to buy up into a larger/more expensive home.  This article by David Streitfeld of  the NY Times goes into a bit more detail on what is on the horizon.  Fact of the matter is…if you are waiting to purchase your home, you may wait yourself out of one completely. 

By summer’s end, buyers and sellers in some of the country’s most upscale housing markets are slated to lose one 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.

But now Democrats and Republicans agree that the taxpayer should no longer be responsible for homes valued well above the national average, and are about to turn a top slice of the housing market into a testing ground for whether the private mortgage market can once again go it alone. The result, analysts say, will be higher-cost loans and fewer potential buyers for more expensive homes.  Read on:

http://ftemerson.wordpress.com/2011/05/12/federal-retreat-on-bigger-loans-rattles-housing/

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