FHA Trying to Coax Banks Back to Mortgage Lending to Risky Borrowers

The federal government is trying to coax banks into making more mortgage loans to risky borrowers by assuring them that minor mistakes on mortgages won't result in penalties, The Wall Street Journal's Joe Light reports. The Justice Department has been claiming in several lawsuits that there have been mistakes by banks in loans backed by the Federal Housing Administration, resulting in billions of dollars of penalties and lenders making fewer loans througy the FHA program. The FHA has now proposed new documents for certifying loans, which FHA leader Edward Golding said would leave "room for minor errors while still letting the government pursue damages in the event of significant mistakes."