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

Published: August 31, 2012

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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