U.S. to lower the size of mortgage it will guarantee

The L.A. Times reports:

Uncle Sam is about to take a first tentative step out of the mortgage business by lowering the size of home loans that the federal government will guarantee, and it's already hitting California neighborhoods with higher costs and bigger down payments.

The downward adjustments have ignited outcries from California politicians and sparked a campaign by the state's largest real estate group and its national partner to extend the higher limits; they argue that the Golden State's housing market and economy can ill-afford another setback to recovery.

"This is just going to kill us," said Beth L. Peerce, president of the California Assn. of Realtors. "You don't want the real estate market to get any worse than it is, and it surprises me that our congressmen and senators don't understand that."

The Obama administration is moving in the prudent direction here. If California housing prices have to be artificially held up by the federal government: maybe they are too high.