As regulators explore down payment increases on mortgages, opposition comes forward fearing many will be priced out
July 21st, 2011 by
The Coalition of Sensible Housing Policy recently released a white paper expressing broad concerns about establishing a 10 percent to 20 percent down payment requirement to meet Qualified Residential Mortgage (QRM) standards.
As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, regulators have explored several ways to prevent homeowners from defaulting on their loans. Buyers who are unable to make the QRM down payment would be subject to a more expensive mortgage, in some cases two points higher than the standard rates.
The coalition worries that even buyers with strong credit ratings could be priced out of the market:
Responsible consumers who maintain good credit and seek safe loan products will be forced into more expensive mortgages under the terms of the proposed rule simply because they do not have 10 or 20 percent in down payment or even more equity for refinancing. These mortgages will be more expensive for consumers because the capital and other costs of retaining risk will be passed onto them, if the private market chooses to offer loans outside of the QRM standard at all. In other words, the proposal unfortunately penalizes qualified, low-risk borrowers.
The National Association of REALTORS distributed the chart below, which depicts the potential affect increased down payments could have on the average American family.
In the shadow of the lending crisis, do you think increased down payments will decrease defaults or will most Americans be priced out of the housing market? How might these changes impact your business?