As part of the financial regulatory overhaul, otherwise known as Dodd-Frank, Congress will be instituting new regulations that will require 20% down payments for home purchases, or if buyer’s put down less than 20%, then the bank must retain 5% of the risk to those mortgages. The National Association of Realtors (NAR) and others are currently lobbying against this rule as they rightly state, in my opinion, that this will great hinder any semblance of a housing recovery. My opinion is it would make a challenging market grind lower and slower.
I realize there are many who say it’s high time we get back to 20% down payments. And given the news that almost 30% of the transactions across the country are cash transactions, perhaps now’s the time to institute this. However, very few transactions close with 20% down payments. If you want to kill the economy, go ahead. Kill it.
Here’s Inman’s take on the QRM Definition debate. If you want a more technical or legal look at the Dodd-Frank QRM Definition, check out AllReg’s commentary by Marissa Aquila, Esq. Vice President & Senior Counsel, Bankers Advisory, Inc.
Banks aren’t going to take the deal to take on 5% of the risk. This will likely effectively push down payments to 20%. If you do that, the housing market will come to a stop.
I’d love to hear what you think. Please leave a comment or two!