How exactly does the proposed 20% down payment rule to meet the criteria for a Qualified Residential Mortgage (QRM) protect against a future credit crisis? So asks Michelle Singletary, syndicated columnist for the Washington Post, as she examines the QRM proposed rule. In her column, Singletary professes confusion as to why regulators have proposed high down payments (as part of Dodd-Frank Wall Street Reform and Consumer Protection Act) to reduce risk when they weren’t one of the major factors contributing to loan defaults in the housing crisis. Instead, large down payments will most likely restrict low-to-moderate income families from purchasing a home. She adds, “If a household earning the median annual income of $47,777 did nothing but save for a 10 percent down payment plus 5 percent in closing costs, it would take 13 years to accumulate enough money — assuming the borrower had saved about 5 percent of his after-tax income — to buy a home with a U.S. median sales price of $173,333, according to calculations by the Center for Responsible Lending.”
Singletary’s concern is shared with other voices, including some unlikely partners, like Consumer Federation of America, Mortgage Bankers Association, National Community Reinvestment Coalition, Center for Responsible Lending and the National Housing Conference.
For more information, read the QRM white paper released by the National Association of REALTORS® and 40 other organizations including the National Housing Conference. An earlier post on NHC’s position on QRM is available here, and FDIC Chairman Bair’s comments on QRM makes good reading, too.