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Qualified Residential Mortgages: Down Payment Rules Threaten Home Buyers—and the Economy

August 31, 2012
Mortgage Lending
Research
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.

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