This high denial rate among mortgage lenders is a result of Obama's policies

The government forces mortgage lenders to make loans that they didn't want to make, now the government wants them to repurchase these loans if they look "iffy." In this environment, who wants to make a new mortgage?

The percentage of mortgage applications rejected by the nation's largest lenders increased last year, spotlighting how banks' cautious lending practices are hampering the nascent housing market recovery.

In all, the nation's 10 largest mortgage lenders denied 26.8% of loan applications in 2010, an increase from 23.5% in 2009, according to an analysis by The Wall Street Journal of mortgage data filed with banking regulators.

Although lenders were expected to pull back from the freewheeling conditions that helped inflate the housing bubble, some economists argue they are now too conservative, and say that with the U.S. economy still wobbly, mortgages need to be easier to obtain for qualified borrowers, not harder.

"As the noose on credit availability tightens, credit is being choked off at a time when the housing market is extremely fragile," says Laurie Goodman, senior managing director at Amherst Securities Group LP. . . .

In past economic cycles, lending standards tended to ease within the first year of an economic recovery, and the OCC survey showed that banks have eased underwriting standards for commercial loans over the 12-month period ended in February.

But in the current cycle, lenders have kept standards tight for home loans even though the economy is growing. "There's no question that accessible credit is a problem," says David Stevens, chief executive of the Mortgage Bankers Association, an industry group.

Mr. Stevens, who headed the Federal Housing Administration for two years until March, says a key factor in banks' reluctance to lend more freely is the aggressive effort by Fannie and Freddie to force banks to repurchase loans if they go bad. . . .

Here is an older article that elaborates on the risks mortgage lenders face.

While repurchases are typically requested of defaulted or seriously delinquent loans, Fannie and Freddie are scrutinizing loans much more closely these days as they try to shore up their own loan books in the face of outsized losses in the wake of the recession. Not all of the loans being requested for repurchase are nonperforming -- some just look iffy -- all are single-family residential loans with vast majority of those currently being questioned classified as prime loans, observers say. . . .