Obama Administration Requests More Lenient Lending Practices

     The Obama Administration is requesting that the banks ease up on those applicants who have weaker credit scores, stating that the housing recovery is leaving to many potential home buyers behind; in particular, young professionals who cannot qualify for financing. Since the burst of the housing bubble, home loans have become difficult to acquire due to banks requiring applicants to meet higher standards. Although it may not have been desirable to a good percentage of the population, it was more than necessary to get the U.S. back on track. It is understandable that everyone wants to have their dream home even if it means borrowing obscene amounts of money that cannot feasibly be paid back however, realistically that just does not work. We clearly saw the outcome of loose lending practices and it was a disaster to say the least. Borrow first and figure out paying back later is just not the way to go. Allowing unqualified people to acquire loans beyond their means is simply asking for a problem. The real problem here doesn't seem to be the borrowing but the fact that people NEED to borrow more and more which is a separate issue for the White House to discuss. 

     So, is the Obama Administration making the right call? The administration says that more lenient mortgage standards would not only help the housing recovery, but the economic recovery overall. While this would be a great idea, critics have put their two sense in as well and they believe an action like this could lead us right back to the risky lending that triggered the housing crash. The administration is working on getting the banks to lend to more borrowers by making use of government backed programs such as the Federal Housing Administration (more dependence on the government, of course). 

     The administration is working with the FHA in an attempt to create new policies that would make the banks more comfortable by assuring they will not face legal action or lose their guarantees if loans that conform to the program's standards later default. The administration is also hoping that Fannie and Freddie will jump on board as well. "If the only people who can get a loan have near-perfect credit and are putting down 25 percent, you're leaving out of the market an entire population of creditworthy folks, which constrains demand and slows the recovery," says Jim Parrot, the former senior adviser on housing for the White House's National Economic Council.

     This would all be great if there were no consequences for loosening up lending standards, but many remain very concerned.  "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," said Ed Pinto, a resident fellow at the American Enterprise Institute and former top executive at Fannie Mae. 

Another Possibility:

Instead of figuring out ways to give people things they want but cannot currently afford, why doesn't the White House figure out some ways to create opportunities for people to be able to afford the things they want... "give a man a fish and he will eat for a day...teach a man to fish and he will never go hungry"... makes sense doesn't it?