Obama Administration Pushing Banks to Make Riskier Loans

WASHINGTON-The Obama administration is seeking to persuade banks to provide financing to prospective homebuyers with weaker credit in exchange for assurances they will not face legal recriminations if they engage in such a policy.

Some housing advocates say the riskier financings will bolster the economy, while skeptics argue such a policy helped create the last housing crash.

Federal housing officials are trying to convince the Justice Department to provide assurances to banks that they will not face legal or financial repercussions if they provide financing to riskier borrowers who meet government standards, but then later default on their loans.

“If that were to come to pass, that would open the floodgates to highly excessive risk and would send us right back on the same path we were just trying to recover from,” says Ed Pinto, a resident fellow at the American Enterprise Institute and former top executive at mortgage giant Fannie Mae. See story in the Washington Post.