The Obama White House is pushing banks to make more home loans available to people with weaker credit; The Washington Post reported on Tuesday.
The idea is to strengthen the economic recovery, the administration contends. The White House believes not enough people are able to buy homes as the housing market recovers.
That includes young people who want their first homes and people with credit records that were hurt in the recession.
"If the only people who can get a loan have near-perfect credit and are putting down 25 percent, you're leaving out of the market an entire population of credit-worthy folks, which constrains demand and slows the recovery," said Jim Parrott, former senior adviser on housing for the White House's National Economic Council.
But critics warn the move could lead to the type of risky loans that caused the housing bubble and crash in the last decade. Taxpayers would be left holding the bag again.
"If that were to come to pass, that would open the floodgates to highly excessive risk and would send us right back on the same path we were just trying to recover from," said Ed Pinto, a resident fellow at the American Enterprise Institute and former top executive at mortgage giant Fannie Mae.