Finding the Right Balance
Lack of underwriting, not low down payments, caused the current crisis. Strong underwriting is the best way to rein in risky loans—and Dodd-Frank already requires this.As part of implementing the Dodd-Frank financial reform bill, federal regulators are charged with defining a "Qualified Residential Mortgage" or QRM. Government proposals have called for down payments up to 20% on QRM loans, but new research shows that mandating large down payments would be a mistake for business and consumers.
Analyzing nearly 20 million mortgages made between 2000 and 2008, the Center for Community Capital and CRL find QRM mortgages requiring a 10% down payment would lock 40% of all creditworthy borrowers out of the market. A 20% down payment would exclude 60% of creditworthy borrowers. See "Balancing Risk and Access: Underwriting Standards for Qualified Residential Mortgages;"read the full report and press release.
Additional Resources
- The Negative Impact of a Government-Mandated 10% Down Payment (issue brief)
- A Government-Mandated 10% Down Payment: Bad for Families, the Housing Market and the Economy (1 page)
- Letter to Regulators Opposing a Mandated 10% Down Payment (submitted by CRL and six other organizations)
- This Coalition for Sensible Housing Policy white paper explains why mandated down payments aren't necessary.
- Locked Out of a Home: The Impact of a 10% Down Payment Requirement on Prospective Home Buyers (CRL issue brief)
- Don't Mandate Large Down Payments on Home Loans (CRL issue brief)
- Coalition for Sensible Housing Policy Joins 326 Members of U.S. Congress Calling for Changes to Proposed QRM Regulations (Press release)
- Joint Letter to Regulators Against High Down Payment Requirements
- "Reworking Risk Retention," a special report by Mark Zandi, Chief Economist, Moody's Analytics.
- Coalition for Sensible Housing Policy June 22 press release