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Economy
Obama administration pushes banks to make home loans to people with weaker credit
2013-04-04
[Washington Post] The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.

President Obama's economic advisers and outside experts say the nation's much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs -- including those offered by the Federal Housing Administration -- that insure home loans against default.

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.
Posted by:Fred

#8  So that insurance on a 200K loan raises the qualifying income by about $8000. Nothing to sneeze at for someone with a mid-level retail wage of 25K.
Posted by: KBK   2013-04-04 10:59  

#7  Isn't that a form of predatory lending, though?
Posted by: Korora   2013-04-04 09:39  

#6  Thomas Sowell: No one will really understand politics until they understand that politicians are not trying to solve our problems. They are trying to solve their own problems — of which getting elected and re-elected are number one and number two. Whatever is number three is far behind.

Many of the things the government does that may seem stupid are not stupid at all, from the standpoint of the elected officials or bureaucrats who do these things.
Posted by: Anguper Hupomosing9418   2013-04-04 09:15  

#5  Does having a mind formed by years of family and 'educational' processes in the Socialist/Redistributionist mold make it intent in the question of malice? Or, as in the allegory of the frog and scorpion, just part of his nature?
Posted by: Procopius2k    2013-04-04 09:01  

#4  Hanlon's razor ?

[Never attribute to malice that which is adequately explained by stupidity]
Posted by: Besoeker   2013-04-04 04:31  

#3  I would've expected this story on April 1st.
Posted by: Bulldog   2013-04-04 02:49  

#2  Cars too. Bankrupt the banks and all is left is his putrid government.
Posted by: newc   2013-04-04 00:44  

#1  Another factor: the bad experience with the lousy loans the FHA has bought has caused it to raise its insurance requirements to 1.3% per year starting this month. That's $220 per month on a $200,000 loan, a 136% increase. And the borrower now also pays 1.75% upfront (adding $3,500 to the closing costs), instead of 0.01% ($20).

What is really bad: if a buyer puts down less than 10%, he will pay insurance for the life of the loan, instead of it dropping out when the loan balance goes below 80% of the original appraised value. You have to refinance to get rid of it. This kicks in in June.

FHA had to do this, their insurance pool was depleted.

The effect is to force everyone who can possibly qualify for a conventional mortgage to choose that, leaving the taxpayers to backstop the new crap. And make financing a home drastically less affordable for those with less than excellent credit.

None of this is getting much attention, but it should raise hell with the housing market, at least at the low end.

Of course, we need a new government initiative to fix this. i.e. hang the fix on the honest taxpayers and homeowners.
Posted by: KBK   2013-04-04 00:16  

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