DaC, I see what you’re saying: Lend far more to a new purchaser than the home will be worth in 3 years time, because that way you boost the price today and so take less of a loss when you foreclose next month on the guy next door who bought/HELOC’d last year.
This would make some sense in a monopoly, where only one investor provided all old and new mortgage money. But many of the parties involved in mortgages have changed. Why would new investors in mortgages want to support the people who bought last year’s mortgages?
