Keep Feds Away From Mortgage Market

George Santayana famously warned, "Those who cannot remember the past are condemned to repeat it." President Obama, a Harvard alum like the late Santayana, would do well to heed his words.

As it is, the Obama administration is reportedly reaching out to the nation's banks and nudging them to make it easier for people with sketchy credit to obtain home loans.

If that sounds disquietingly familiar it's because banks were similarly nudged by previous administrations, which helped inflate the mother of all housing bubbles, followed by the worst housing-market slide this side of the Great Depression.

A senior administration official, unnamed by the Washington Post, assured that neither President Obama's economic advisers, nor the Justice Department, nor the Federal Housing Administration intends on "giving any opportunity to restart the kind of irresponsible lending that we saw in the mid-2000s."

The administration simply is concerned that the long-awaited housing recovery is leaving too many people behind, including first-time homebuyers and people whose credit ratings took a hit during the 2007-09 recession.

Indeed, they point to observations by Federal Reserve Gov.

Elizabeth Duke at her appearance last month at the Mortgage Bankers Association Mid-Winter Housing Finance Conference. According to Gov. Duke, while new-home purchases from 2007-12 fell 30 percent for borrowers with credit scores 780 or above, they dropped 90 percent for borrowers with scores of 620-680.

The administration hopes to address that seeming dichotomy with an initiative that might be called "no homebuyer left behind."

It would give banks incentives to lend to a wider range of borrowers by steering them to federal programs — like those proffered by FHA — that ensure home loans against default. It also would have the Justice Department indemnify banks against legal action if they make loans to risky, though qualified, borrowers who subsequently default.

If that sounds alarmingly like a recipe for another mortgage crisis, that's because it most certainly is.

The administration says that, by intervening in the housing market, it can do much to invigorate the economy, presumably growing the nation's gross domestic product at a clip comparable to the rate during previous recoveries.

But we urge President Obama to follow the example of his predecessor Calvin Coolidge, of whom Will Rogers reputedly said, "He didn't do much but that's what they wanted done."

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