The Obama Subprime Bubble

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Investors Business Daily:

Subprime Scandal: The administration is fueling another housing bubble by pushing lenders to finance homes for people who can't afford them. Pressure is coming from all corners of government.

President Obama is worried about a plunge in new-home buying among minority borrowers with subprime credit scores. So he's using the Federal Housing Administration, for starters, to help finance failure.

In a reckless gambit, FHA is asking lenders to relax lending standards, while assuring them it will back home loans down to a 580 FICO score with a minimal down payment and high debt-to-income ratio.

"The obligation that I have is to ensure lenders using the FHA program are lending to as full a spectrum of the credit box as possible," FHA Commissioner Carol Galante recently said.

FHA's chief urging banks to underwrite subprime loans conjures up bad memories of Fannie Mae CEO Franklin Raines begging for more subprime loans before the crisis.