20 Percent Down Payment Requirement Criticized
Representatives from the Mortgage Bankers Association, the Center for Responsible Lending, and the National Housing Conference came together Friday to argue against the requirements proposed for the new Qualified Residential Mortgage, or QRM standard. The QRM is a part of new risk retention rules included in the Dodd-Frank Financial Reform legislation passed in 2010.
The proposed new rules, which are still under a comment phase until the end of next week, require a 20 percent down payment for home loans to qualify as QRMs. If lenders originate loans with smaller down payments, they are then required to hold on to 5 percent of those loan's risk.
Banks across the country have criticized the proposal, insinuating that the new rules would drive up the costs associated with mortgages, and make them harder to get. Consumer advocates have been critical as well, calling the QRM standard a form of wealth discrimination.
"We believe that the regulators, while being very thoughtful through this process, have overreached by adding loan to value and DTI (Debt to Income), which will create societal boundaries, which we believe were unintended by those who drafted the law in the first place," commented new MBA president Dave Stevens, who previously headed the Federal Housing Administration, currently the only place to get a home loan with a low down payment.
In addition to the reps from various housing agencies, 40 Senators have also signed a letter calling for to QRM proposal to be re-written in broader terms. The letter called the required 20 percent down payment as "unnecessarily tight."
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