The federal government is planning to "retreat" from providing "bigger loans" for housing, according to the lead story in today's edition of The New York Times by David Streitfeld, a move that "may push down prices."

The article said that Michael S. Barr, a former assistant Treasury secretary, said the government's "retrenchment would be painful for many communities."

"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 along," the article said, adding that "the result, analysts say, will be higher-cost loans and fewer potential buyers for more expensive homes."

"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," the article said.

The changes are due to take effect September 30. The new mortgage limits will be determined by various formulas including the median price in the county, but they will not fall back to their pre-crisis levels, the article said, adding that "in many affected counties, the loan limit will fall about 15 percent, to $625,500."

"In the Federal Reserve's quarterly survey of lenders, released last week, only two of the 53 banks said their credit standards for prime residential mortgages had eased," the article said, adding that "another two said they had tightened."