Higher Down Payment Requirement Could Derail Housing Recovery
Higher Down Payment Requirement Could Derail Housing Recovery
Higher Down Payment Requirement Could Derail Housing Recovery
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March 21, 2011 (Chris Moore)
mortgage-derail-image
As part of the Dodd-Frank Finance Reform Bill, in order to reduce the risk of future housing meltdowns like the one we’ve been experiencing since 2007, mortgage lenders will be required to retain 5 percent of the risk of any home loans they make that don’t meet yet to be determined down payment requirements. Known as a “qualified residential mortgage,” or QRM, it is one of the most important pieces of the reform puzzle that some critics say could derail the housing recovery.

According to a recent study by the Center for Responsible Lending (CPL), proposals that have been suggested with required down payments as high as 20 percent could have a severe impact on the housing recovery. CRL studies show that it would take 14 years for the average American family to save enough to cover a 20 percent down payment.

With risk retention, a borrower could still purchase a home but could face interest rates as much as 3 percentage points higher than a QRM compliant borrower, which would force many borrowers out of the market according to some market analysts.

CRL argues that the government’s plan leans too heavily towards solutions that would remove excessive risk-taking by requiring higher down payments, but says higher down payments are not linked to loan performance. They blame sub-prime and alternative loan products for the decline in the mortgage market and that traditional low down payment loans should not be confused with those higher risk products.

“In fact, low down payment home loans have been a significant and safe part of the mortgage finance system for decades,” CRL contended in its analysis.

After rumors got out about the possible QRM down payment requirements, Camerom Findlay, a chief economist for LendingTree, wrote on his blog that it “would have a severe and noticeable impact for borrowers.”

For one, he said, total loan costs to borrowers will go up about 36% and about 15% to 35% of the market will no longer be qualified to apply for a loan.

The effects of QRM could be further complicated by the phasing out of Freddie Mac and Fannie Mae and a lessening role of the Federal Housing Administration (FHA) which together, insure about 90 percent of all mortgages being originated at this time.

Tags: Center for Responsible Lending, Dodd-Frank, qualified residential mortgage, QRM, down payment requirements, housing recovery, mortgage lenders, FHA, Freddie Mac, Fannie Mae

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Helpful Tools
Mortgage
Calculator

Estimate your monthly mortgage payment
Auto Loan
Calculator

Determine how much car you can afford before buying
Learn About
Mortgage Loans

Learn about the different types of home loans
15 Year vs 30 Year
Loan Comparison

Compare 15 year and 30 year mortgage loans
Todays Mortgage
Rates

See today's mortgage rates. Shop, compare and save.

March 21, 2011 (Chris Moore)
mortgage-derail-image
As part of the Dodd-Frank Finance Reform Bill, in order to reduce the risk of future housing meltdowns like the one we’ve been experiencing since 2007, mortgage lenders will be required to retain 5 percent of the risk of any home loans they make that don’t meet yet to be determined down payment requirements. Known as a “qualified residential mortgage,” or QRM, it is one of the most important pieces of the reform puzzle that some critics say could derail the housing recovery.

According to a recent study by the Center for Responsible Lending (CPL), proposals that have been suggested with required down payments as high as 20 percent could have a severe impact on the housing recovery. CRL studies show that it would take 14 years for the average American family to save enough to cover a 20 percent down payment.

With risk retention, a borrower could still purchase a home but could face interest rates as much as 3 percentage points higher than a QRM compliant borrower, which would force many borrowers out of the market according to some market analysts.

CRL argues that the government’s plan leans too heavily towards solutions that would remove excessive risk-taking by requiring higher down payments, but says higher down payments are not linked to loan performance. They blame sub-prime and alternative loan products for the decline in the mortgage market and that traditional low down payment loans should not be confused with those higher risk products.

“In fact, low down payment home loans have been a significant and safe part of the mortgage finance system for decades,” CRL contended in its analysis.

After rumors got out about the possible QRM down payment requirements, Camerom Findlay, a chief economist for LendingTree, wrote on his blog that it “would have a severe and noticeable impact for borrowers.”

For one, he said, total loan costs to borrowers will go up about 36% and about 15% to 35% of the market will no longer be qualified to apply for a loan.

The effects of QRM could be further complicated by the phasing out of Freddie Mac and Fannie Mae and a lessening role of the Federal Housing Administration (FHA) which together, insure about 90 percent of all mortgages being originated at this time.

Tags: Center for Responsible Lending, Dodd-Frank, qualified residential mortgage, QRM, down payment requirements, housing recovery, mortgage lenders, FHA, Freddie Mac, Fannie Mae

FILL OUT THE FORM
It all starts here. Select the loan product you want to apply for and complete the subsequent questionnaire.
WE VERIFY & TRANSMIT TO LENDERS
Once we receive your completed questionnaire we verify a couple vital pieces of information and direct your information to our network of lenders, all within minutes.
REVIEW YOUR OFFERS
With offers in hand you can now compare rates and costs and get the best possible deal. Comparison shopping made easy. You fill out one form and lenders compete for your business.
CHOOSE YOUR LENDER
Congratulations! With the great learning tools we provide for you at LoanRateNetwork and the offers you have received, you've found the right product and the best rate.
HOW LOANRATENETWORK
LOAN CENTER WORKS
ADVANTAGES OF USING
LOANRATENETWORK
FAST & EASY. DATA ENCRYPTED
Applying to multiple lenders is fast and easy with our one simple questionnaire. Choose the product you’re looking for, take a few moments to answer a few questions and you’re on your way to saving.
NO OBLIGATION. NO HIDDEN FEES
Any of the services on our website are 100% free, there is no obligation to use our services or any hidden fees. We’re not loan brokers so we don’t charge broker fees like other websites.
NO SSN OR CREDIT CHECK
No SSN or credit check is necessary to use our services. We bring lenders to you so they can compete for your business and you save. That information only becomes necessary after you choose a lender.
Helpful Tools

March 21, 2011 (Chris Moore)
mortgage-derail-image
As part of the Dodd-Frank Finance Reform Bill, in order to reduce the risk of future housing meltdowns like the one we’ve been experiencing since 2007, mortgage lenders will be required to retain 5 percent of the risk of any home loans they make that don’t meet yet to be determined down payment requirements. Known as a “qualified residential mortgage,” or QRM, it is one of the most important pieces of the reform puzzle that some critics say could derail the housing recovery.

According to a recent study by the Center for Responsible Lending (CPL), proposals that have been suggested with required down payments as high as 20 percent could have a severe impact on the housing recovery. CRL studies show that it would take 14 years for the average American family to save enough to cover a 20 percent down payment.

With risk retention, a borrower could still purchase a home but could face interest rates as much as 3 percentage points higher than a QRM compliant borrower, which would force many borrowers out of the market according to some market analysts.

CRL argues that the government’s plan leans too heavily towards solutions that would remove excessive risk-taking by requiring higher down payments, but says higher down payments are not linked to loan performance. They blame sub-prime and alternative loan products for the decline in the mortgage market and that traditional low down payment loans should not be confused with those higher risk products.

“In fact, low down payment home loans have been a significant and safe part of the mortgage finance system for decades,” CRL contended in its analysis.

After rumors got out about the possible QRM down payment requirements, Camerom Findlay, a chief economist for LendingTree, wrote on his blog that it “would have a severe and noticeable impact for borrowers.”

For one, he said, total loan costs to borrowers will go up about 36% and about 15% to 35% of the market will no longer be qualified to apply for a loan.

The effects of QRM could be further complicated by the phasing out of Freddie Mac and Fannie Mae and a lessening role of the Federal Housing Administration (FHA) which together, insure about 90 percent of all mortgages being originated at this time.

Tags: Center for Responsible Lending, Dodd-Frank, qualified residential mortgage, QRM, down payment requirements, housing recovery, mortgage lenders, FHA, Freddie Mac, Fannie Mae

HOW LOANRATENETWORK
LOAN CENTER WORKS
FILL OUT THE FORM
It all starts here. Select the loan product you want to apply for and complete the subsequent questionnaire.
WE VERIFY & TRANSMIT TO LENDERS
Once we receive your completed questionnaire we verify a couple vital pieces of information and direct your information to our network of lenders, all within minutes.
REVIEW YOUR OFFERS
With offers in hand you can now compare rates and costs and get the best possible deal. Comparison shopping made easy. You fill out one form and lenders compete for your business.
CHOOSE YOUR LENDER
Congratulations! With the great learning tools we provide for you at LoanRateNetwork and the offers you have received, you've found the right product and the best rate.
ADVANTAGES OF USING
LOANRATENETWORK
FAST & EASY. DATA ENCRYPTED
Applying to multiple lenders is fast and easy with our one simple questionnaire. Choose the product you’re looking for, take a few moments to answer a few questions and you’re on your way to saving.
NO OBLIGATION. NO HIDDEN FEES
Any of the services on our website are 100% free, there is no obligation to use our services or any hidden fees. We’re not loan brokers so we don’t charge broker fees like other websites.
NO SSN OR CREDIT
CHECK
No SSN or credit check is necessary to use our services. We bring lenders to you so they can compete for your business and you save. That information only becomes necessary after you choose a lender.