Melvin L. Watt, director of the Federal Housing Finance Agency, announced a program yesterday offering more reassurances to mortgage lenders that fear they could suffer unpredictable losses on the loans they sell to the government, the New York Times reported today. The move in large part is intended to reassure banks that have had to pay tens of billions of dollars to settle legal cases arising from the housing boom and bust and to buy back bad loans sold to Fannie and Freddie. To avoid having to make those payments again, many lenders now demand that borrowers meet stricter requirements for loans, known in the industry as overlays. Separately, Watt disclosed that efforts are underway to allow borrowers to receive government-backed loans with much smaller down payments than are now required.
