The Federal Housing Finance Agency appears prepared to double down on their commitment to expand lending to borrowers who otherwise find it tough to qualify for traditional loans, with Federal Home Loan Mortgage Corp (OTCBB:FMCC) suggesting that even more low down-payment products could be introduced in the coming period. Donald Layton, the CEO of Federal Home said that without government firms like Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac expanding the credit box company’s future profits could suffer.

It is because borrowers are selecting with their feet and preferring smaller community banks over bigger lenders. Smaller banks may keep loans on own books and design their own loan deals instead of conforming to conservative and rigid income guidelines, and sell the loans to Federal National and Freddie.

The scenario

Overall, the mortgage industry in the U.S. seems to be finally recovering from the financial crisis of 2009-2010, with cash sales declining and credit expanding since 2009. The Mortgage Bankers Association stated that it raised its projection for mortgage originations 2015 to $821 billion from $801 billion in July 2015. It also increased its forecast for 2016 to $905 billion compared to initial estimates of $885 billion.

Offering an increased number of low down-payment products to the industry could result in a repetition of 2014 when congressional critics of Federal National, Freddie Mac and the FHFA faulted the plan, stating it could drive the mortgage industry to pre-crash scenario, when borrowers with little of own funds invested in a house simply walked away. Federal National and Freddie required almost $200 billion in bailout assistance after many mortgages defaulted.

Currently, both the mortgage giants are under the FHFA’s conservatorship, and Layton said mortgage bankers it was probable to stay unchanged in the near future. They are still years away from a reform that could drive the companies out from under the regulator’s control.