The Obama administration is readying a push to get banks to make more home loans available to individuals with weaker credit, The Washington Post’s Zach Goldfarb reports.
It’s a push that walks a tightrope, since it is expected to help boost the continuing economic recovery immediately but risk opening up the shaky lending that led to the housing crash. Obama’s plan would provide for more lending for individuals such as young people buying their first homes, as well as people whose credit has been damaged by the recession.
[A]dministration 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.
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.
Obama hinted at a push during his State of the Union address in January.
“Even with mortgage rates near a 50-year low, too many families with solid credit who want to buy a home are being rejected,” Obama said. “Too many families who have never missed a payment and want to refinance are being told no. That’s holding our entire economy back, and we need to fix it.”
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