June 2nd, 2011 12:11 PM by Taydus Taydus, AHWD, CNE, CRS, GRI
Do you plan on buying a home at some point in your future? What about your kids? Think they may want to purchase a home at some point? Do you plan on selling your home at some point? Please read the below article posted by NAR (National Association of Realtors) regarding the government’s proposal to INCREASE THE MINIMUM DOWN PAYMENT in order to purchase a home. This affects everyone! Even if you plan to sell your home at some point and live in a box, the person buying your home will most likely need to secure a loan – so this affects you. This is not the answer to our housing crisis as it will price many potential, well qualified, home buyers right out of the market, and make homeownership unobtainable.
The public comment period on this issue ends June 10th. I strongly urge you to contact your U.S. Representative and express your concern on this issue. If you reside in Jared Polis’ district (2nd District of Colorado), you can email him at Jared.Polis@mail.house.gov and express your concern.
Realtors® Oppose High Down Payment Requirement for Qualified Residential Mortgage Exemption
Washington, March 29, 2011
High down payment requirements being proposed by federal regulatory agencies as part of the upcoming rulemaking under the Dodd-Frank Wall Street Reform and Consumer Protection Act will unnecessarily burden homebuyers and significantly impede the economic and housing recovery, according to the National Association of Realtors®.
Six agencies, including the Department of Housing and Urban Development, Federal Deposit Insurance Corp., Federal Housing Finance Agency, Federal Reserve, Office of the Comptroller of the Currency, and the U.S. Securities and Exchange Commission, are developing a proposed risk retention regulation under the Dodd-Frank Act that requires lenders that securitize mortgage loans to retain 5 percent of the credit risk unless the mortgage is a qualified residential mortgage (QRM); FHA and VA mortgages would also be exempted. The purpose is to create strong incentives for responsible lending and borrowing.
“As the leading advocate for home ownership NAR supports a reasonable and affordable cash investment requirement coupled with quality credit standards, strong documentation and sound underwriting,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. “A narrow definition of QRM, with an unnecessarily high down payment requirement, will increase the cost and reduce the availability of mortgage credit, significantly delaying a housing recovery.”
NAR believes that Congress intended to create a broad QRM exemption from the 5 percent risk retention requirement to include a wide variety of traditionally safe, well-underwritten products. Congress chose not to include a high down payment among the criteria it specified in the Dodd-Frank Act to guide the regulators in defining a QRM. Strong evidence shows that responsible lending standards and ensuring a borrower’s ability to repay have the greatest impact on reducing lender risk.
“We need to strike a balance between reducing investor risk and providing affordable mortgage credit. Better underwriting and credit quality standards have greatly reduced risk. Adding unnecessarily high minimum down payment requirements will only exclude hundreds of thousands of buyers from home ownership, despite their creditworthiness and proven ability to afford the monthly payment, because of the dramatic increase in the wealth required to purchase a home,” said Phipps.
The definition of QRM is important because it will determine the types of mortgages that will generally be available to borrowers in the future. Borrowers with less than 20 percent down could be forced to pay higher fees and interest rates, up to 3 percentage points more, for safe loans that otherwise do not meet too narrow QRM criteria.
NAR is concerned that a narrowly defined QRM will also require severe tightening of FHA eligibility requirements and higher FHA premiums to prevent huge increases in its already robust share of the market, adding additional roadblocks to sustainable home ownership.
“Saving the necessary down payment has always been the principal obstacle to buyers seeking to purchase their first home. Proposals requiring high down payments will only drive more borrowers to FHA, increase costs for borrowers by raising interest rates and fees, and effectively price many eligible borrowers out of the housing market,” said Phipps. “We strongly urge the regulators to consider the negative consequences of setting onerous limits on the availability of credit.”
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.