A mortgage-themed article in the Washington Post raised a few eyebrows this past week. The Post reports that the Obama administration is pushing to make more home loans available to people with weaker credit. Administration officials argue that making home loans available to less-qualified borrowers will help propel the housing industry (and the overall economy) forward.

We find it interesting that many Obama officials have forwarded some of the same arguments we've forwarded over the past year. In particular, officials want lenders to use more subjective judgment in determining lending standards. At the same time, they want the Justice Department to assure lenders that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

We are all for less recriminations and more latitude in decision making, but it has to be implemented prudently. The financial meltdown that occurred in 2008 was largely attributable to a wide swath of mortgage loans that went south. Though more funded people would surely help housing and the economy at the moment, we have to ask, what's the risk?

Another default surge could easily bankrupt (permanently) Fannie Mae and Freddie Mac and sink the FHA. A housing bubble would also become a growing worry. The last thing the housing market needs at this stage are inflated home prices that prove to be unsustainable.

We would like nothing more than to have a more inclusive, less risk-averse mortgage market. But that market must be based on fundamentally sound lending principals.

 Courtesy of Jessica Regan.

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