As the government’s generous tax credit for homebuyers dried up at the end of April, sales of new and existing homes plunged, a situation that could threaten the economy, notes The Associated Press, which reports that the Federal Reserve, mindful of the fragility of the housing market, now says an economic recovery is only “proceeding”—less optimistic than before, when it said the rebound was strengthening. “We all knew there would be a housing hangover from the expiration of the tax credit,” writes Mike Larson, real estate and interest rate analyst at Weiss Research. “But this decline takes your breath away.” One bright spot has been interest rates. The lowest mortgage rates since 1971 have appeared in the Denver-area housing market, providing a new incentive for buyers. For instance, the average rate for 30-year fixed-rate loans dropped to 4.69 percent, from 4.75 percent last week, according to mortgage company Freddie Mac (via The Denver Post). Chris Mygatt, president and chief operating officer of Coldwell Banker Residential Brokerage in Denver, says the low rates are “helping soften our landing from the tax credit ending.”

Meanwhile, Fannie Mae, Freddie Mac’s sister company, is seeking to put an end to people walking away from their unpaid mortgages by punishing them, writes The New York Times. A Fannie Mae spokeswoman says the company’s decision to sue homeowners who appear to have the means to pay—but don’t—would “encourage borrowers to pursue alternatives to foreclosure.” But Lou Barnes, a Colorado mortgage banker, wonders if “Fannie wants to lock people up in a jail of negative net worth for much of the rest of their lives. They’re bringing back the debtor’s prison.”