This post first appeared on Minyanville.

It's interesting that the Office of Housing and Urban Development (HUD) - that oversees the FHA - doesn't support Sen. Frank's proposal to expand its role in helping troubled borrowers.

This says two things. First, the FHA knows keeping borrowers in homes they can't afford may be good for individuals who got in over their heads, but it's bad for the system itself.

Second, compare FHA's attitude to that of Fannie Mae (FNM) and Freddie Mac (FRE), whose profit motive makes them ask for a bigger and bigger role regardless of risk it poses to the system. Incentives are the key to understanding why these entities do what they do.

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