BAP Blog Realtors to Regulators Regarding Stricter Lending Guidelines

A newly proposed rule by federal regulators to impose a minimum 20 percent down payment, stringent debt-to-income ratio requirements and rigid credit standards will most likely deny millions of Americans access to safe, low-cost mortgages, according to the National Association of Realtors®. In a comment letter submitted recently, NAR expressed dissatisfaction over the unduly narrow definition of qualified residential mortgages (QRM) that would be exempt from risk retention requirements. Non-QRM mortgages will have higher interest rates and fees, making home ownership more expensive or unattainable for many of today’s aspiring home owners. NAR urged regulators to withdraw the proposed risk retention rule and go back to the drawing board. As the leading advocate for home ownership the NAR firmly believes Congress intended to create a broad QRM exemption and strong evidence shows that responsible lending standards and ensuring a borrower’s ability to repay have the greatest impact on reducing lender risk The proposed rule should be withdrawn, revised and republished for public comment. If this does not happen then millions of hard-working, creditworthy consumers will not be able to achieve their dreams of owning a home. NAR has criticized the proposed rule to require a 20 percent minimum down payment requirement saying it ignores strong evidence that responsible lending standards and ensuring a borrower’s ability to repay have the greatest impact on reducing lender risk. The low foreclosure rate among Federal Housing Administration and Veterans Administration loans, which have the lowest down payment requirements and relatively low default rates, is further evidence that the key to safe lending is sound underwriting and documentation rather than high down payments. Based on NAR estimates, it would take more than a decade for a family with a median household income to save enough for a 20 percent down payment. A 10 percent down payment would take a family more than eight years to save. The impact on minority and first-time home buyers would be even worse.