The following editorial is excerpted from Tuesday's Kansas City Star:

Between 2007 and 2009 the Federal Housing Administration took on a countercyclical role as the real estate market plunged. To help prop up demand, FHA rapidly expanded its portfolio and backed riskier loans.

Now many of those mortgages are going bad. FHA may have kept the housing crash from becoming worse, but at the risk of hitting a bailout-weary public with another huge bill.

In only three years, its loan portfolio ballooned from about $685 billion to $1.1 trillion. According to a recent independent audit, its reserves were at $30.4 billion while estimated losses were $46.7 billion, leaving a projected deficit of more than $16 billion.

Most of the losses are on loans backed during the 2007-09 frenzy. Not to worry, the agency says. It plans to raise mortgage insurance fees and sell off 10,000 delinquent loans every three months; a Treasury bailout won't be needed.

That's nice, but the trend is hardly encouraging.

The FHA's troubles are an example of how policies with laudable goals - extending home ownership to people of modest means - can run off the rails with the help of eager industry lobbyists and compliant lawmakers.

While FHA loans guaranteed after 2009 are expected to be profitable, Congress should put this agency on a path that will return it to its original mission: reasonable help for low- and moderate-income borrowers.

Two important steps in that direction would be higher minimum down payments and a lower maximum-loan cap.