The Obama administration has begun a broad effort to extend home loans to those with weaker credit–a development critics say harkens back to the risky lending that led to the housing market collapse.
Intending to expand the housing recovery, the administration is working through a number of departments and agencies, the Washington Post reports:
Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.
Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan and are seeking to make it easier for people who owe more than their properties are worth to refinance at today’s low interest rates, among other steps. [...]
The effort to provide more certainty to banks is just one of several policies the administration is undertaking. The FHA (Federal Housing Administration) is also urging lenders to take what officials call “compensating factors” into account and use more subjective judgment when deciding whether to make a loan — such as looking at a borrower’s overall savings.
The federal government has insured between 80 and 90 percent of all new home loans since 2008, according to the Post.