What Is The Difference Between "Flexible Underwriting" and "Predatory Lending"?

Even as Fan and Fred reinflate rapidly out of sight of everyone, there is a new nominee to head their "regulator," now going under the name of the Federal Housing Finance Agency (FHFA).  He is Congressman Mel Watt, Democrat of North Carolina.  Haven't heard of him?  He is the representative from the most preposterously gerrymandered district in the country, NC-12, which snakes in a narrow band across half the state to take in portions of Greensboro, Winston-Salem and Charlotte.  

More on the merits, Paul Sperry at Investors Business Daily in its July 29 edition has a long piece on Mr. Watts and FHFA.  Watts is one of, if not the, leading advocates of "flexible underwriting" as a means of increasing home ownership among low income groups.  IBD gives some of the history:

On the eve of the financial crisis, Watt actually proposed the creation of the regulatory agency he now seeks to run — only, he designed it not to reform Fannie and Freddie but to pressure them to underwrite even more affordable housing, exposing them to even more risk.  The bill he co-sponsored with then-banking panel Chairman Barney Frank — the Federal Housing Finance Reform Act of 2007 — would have forced the federally backed mortgage giants to meet even tougher quotas for affordable lending, while contributing to an "Affordable Housing Fund" to rebuild blighted urban areas.  "The real benefit of this bill is that it will provide a big stimulus for more affordable housing," Watt said at the time, ignoring concerns the agencies already were overexposed to low-income loans.

Shortly after Watt's proposed bill to let Fan and Fred inflate things even further n 2007, the twins collapsed to the tune of a direct $189 billion cost to the taxpayer, not to mention the additional indirect costs of the financial crisis.   A further article from IBD on May 6 lists some of the proposed reforms to Fan and Fred that Watt resisted and voted against over the years:  for example, a proposal to require them to hold more capital, and a proposal to cut off their line of credit from the Treasury.

Of course what occurred in 2008 and after was that Watt's "flexible underwriting" turned overnight into "predatory lending."  Suddenly the banks that had had the chutzpah to follow Fan and Fred's guarantees into making sub-prime loans turned instantly from good guys providing "affordable housing," into bad guys leading the unsuspecting and unsophisticated into underwater mortgages from which there was no escape.

IBD points out that there is no indication that Watt has changed his views, and every reason to believe that he will use his post at FHFA to goad Fan and Fred into inflating the next housing bubble as fast as possible and to make it as big as possible.  Is there any possible good that can come of this?  Does Watt, or his sponsor President Obama, really believe that it helps the intended beneficiaries to use Federal guarantees to get people of low income and iffy credit into large loans that they can barely afford?  Well, we're now getting started on another round of that, with little to no chance that it will come out any better than the last round.