Home loans to lower-income Americans are dwindling as federal regulators and major banks continue to haggle over who pays when riskier mortgages go bad, Bloomberg News reported today. Federal Housing Administration loans, given to borrowers with weaker credit scores and requiring small down payments, plummeted 19 percent in the nine months ending June 30 compared with a year earlier. A meeting on Wednesday at the White House between government officials and banking executives ended without an announcement of any breakthroughs on the dispute. The largest U.S. home lenders are curtailing FHA mortgages because of concerns that they will be penalized for what they consider immaterial underwriting errors when loans default. JPMorgan Chase & Co., Bank of America Corp. and other lenders have paid more than $3 billion in fines for originating faulty FHA loans during the housing bubble following lawsuits brought by the Department of Justice and state attorneys general. Julian Castro, secretary of the Department of Housing and Urban Development that oversees FHA, said that the agency wants to ease credit by rewriting its handbook to clearly spell out when lenders can be forced to bear the cost of soured loans.
