NAR issues Call for Action: Don’t let 20% down be the standard

We’re gonna keep pounding this QRM thing because it’s critical for your business.

QRM: Qualfiied Residential Mortgage. A mortgage that meets certain requirements, and thus one that Fannie and Freddie will be willing to buy from lenders. But what will make a loan “qualify”? Federal regulators are considering making a 20% down payment part of the qualifications.

Sure, banks could loan to someone who puts less than 20% down — but only if they’re not planning to sell the loan to F&F (which own something like 90% of the secondary mortgage market). So whatever the QRM standard is going to be, you know it’s going to be the de facto mortgage standard.

Can you imagine if a 20% down payment was the only way to get a low-interest mortgage? How well do you think that would work? Hint: In the last 12 months, 60% of home buyers have put down less than that. And you know how hard it’s been to get a mortgage, so these are the folks with the great credit ratings — and they’re not shelling out $40,000 or $50,000 as a down payment.

Thus, the Call for Action: Don’t let federal regulators set the QRM bar so high. It’s one thing to ensure that reasonable standards are being met, but it’s another thing to price out 60% of the market.

Give a two-and-a-half minute listen to NAR President Ron Phipps explaining what we have to do. Then go to NAR’s Realtor® Action Center where it only takes a couple of clicks to tell your congressmen to rein in the regulators before they go too far.

Without your voice, you could end up telling your clients, “Come back when you’ve got 40 grand in cash. Then we can go house shopping.”

 

 

About Andrew Kantor

Andrew is VAR's editor and information manager, and -- lessee now -- a former reporter for the Roanoke Times, former technology columnist for USA Today, and a former magazine editor for a bunch of places. He hails from New York with stops in Connecticut, New Jersey, Cincinnati, Columbus, and Roanoke.
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2 Responses to NAR issues Call for Action: Don’t let 20% down be the standard

  1. Will says:

    Would a reduction in price across the housing market be bad for society? QRM would probably drive short term reductions. I can see why Realtors would dislike it, depressed prices tend to push down volume, both of which reduce income from transactions, but as citizens of the USA, might this be a piece of what is needed to clean our financial-house?

    As a homeowner in VA, I don’t particularly like the idea of prices down either. As someone who saved for several years and put 20% down with a 30-year fixed mortgage in 2006 (talk about poor timing), if I sell, I would take a significant financial hit.

    If you want to push an agenda that would help you and everyone else, how about pushing for more equitable income distribution. That would allow more people to SAVE for a down-payment rather that taking on debt, which only further exacerbates the wealth gap.

  2. Scott Brunner says:

    Will: The point, I think, is that all evidence indicates that increasing down payments does NOT ensure that a mortgage loan will perform better. Nevertheless, that’s one the reason this onerous rule has been proposed – that and to ensure that banks don’t take unnecessary risks. If the Fed and FHFA want to assure better loan performance, they need to look at underwriting standards, not down payments. The 20% down proposal won’t fix the problem.

    The last paragraph of your comment reminded me of this quote: “There is all the difference in the world between treating people equally and attempting to make them equal.” – Friedrich August Hayek

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