By Robert Freedman, Senior Editor, REALTOR® Magazine
There’s still a long way to go for NAR and the 44 other organizations in a coalition to get banking regulators to rethink their controversial qualified residential mortgage (QRM) rule, but a press conference held on Wednesday in a Senate hearing room shows how well lawmakers can work together when the issue is strongly bi-partisan, as home ownership issues are.
At that press conference, Sen. Johnny Isakson (R-Ga.) and Sen. Kay Hagan (D-N.C.) joined Rep. John Campbell (R-Calif.) and Rep. Brad Sherman (D-Calif.) to make a forceful call to banking regulators to go back to the drawing board on QRM. It’s not that the proposed rule is completely off the mark; it takes important steps toward strengthening underwriting requirements so lenders don’t make the same mistakes they made during the housing boom. But they need to go back to the drawing board on the proposed requirement that borrowers make a down payment of at least 20 percent to get the most affordable financing available for borrowers with solid credit.
As Sen. Isakson said at the press conference, it was legislators’ intent to require sound underwriting standards for borrowers, not a minimum downpayment requirement. “We recognized we had an underwriting problem, not a downpayment problem,” he said.
Thanks in large measure to concerns raised by the public, members of the coalition to get the rule changed, and a strong response by REALTORS® to a Call for Action NAR issued earlier in the month, banking regulators delayed the public comment deadline on their proposal until early August. That suggests that word of everyone’s concern is getting through to regulators.
The delay provides breathing space to continue making the case against the downpayment requirement, but it was especially reassuring to see lawmakers from across the aisle coming together for a common cause. Campbell said reforming the secondary mortgage market companies Fannie Mae and Freddie Mac is imperative, but it’s equally imperative not to make things worse, and that’s what the QRM rule will do. Sherman, his Democratic colleague from another part of California, said the rule will give the handful of too-big-to-fail banks monopoly pricing power.
REALTORS® can rightly take pride in the bipartisan comity of lawmakers on this issue. You often hear talk about the partisan contentiousness of today’s legislative process, but when it comes to home ownership, lawmakers continue to work together. More than half of the House and almost half of the Senate have signed a letter to banking regulators expressing their concern over the 20 percent down payment proposal. We can expect more to signal their concern over time as they learn more about the issue — it is, after all, a complicated matter that not all lawmakers are familiar with.
What the press conference showed is that, when lawmakers who are familiar with the issue educate their colleagues about it, the message could just as likely come from a member from the other side of the aisle because it’s a message that both sides care about.
I can not understand who in their right mind would think this was a good idea. I would like to hear a good reason to why the 20% down backers feel this is the way to go. I couldn’t imagine how many more jobs would be lost, how many more foreclosures the banks would gain ontop of their already high inventory. I honestly can not believe it. This makes me extremely dissappionted with a lot of the people in control up there in Washington, actually frightening to think that they do not care about everyone that will be dramatically affected by this reform. This is not a reform this would be devastating to our own buyers within the country. This would be devastating to the real estate market itself. I could imagine prices falling even more with more foreclosures, and more foreign buyers taking possesion of our land. If you want to make this change… that is if they have a good reason, we should raise the downpayment gradually, at an anual rate, to give the American people a chance to adapt to such a dramatic change in the way we should buy a home. And we might be surprised at how the market would react to this. More people would get off the fence and buy before the banking regulations change, but give them time to prepare dont just turn the water off.
[...] On QRM, No Partisan DivideSpeaking of Real Estate (blog)But they need to go back to the drawing board on the proposed requirement that borrowers make a down payment of at least 20 percent to get the most affordable financing available for borrowers with solid credit. As Sen. Isakson said at the press …and more » [...]
It is not the down payment amount or “skin in the game” that is the problem. It was the greedy lenders making loans to those that should never have had one. Look at the performance of VA loans. Zero down payment and the lowest default rate. It just goes to show that the answer is not always in the amount of down payment.
[...] More on QRM on Speaking of Real Estate. [...]
[...] More on QRM on Speaking of Real Estate. [...]
[...] More on QRM on Speaking of Real Estate. [...]
It is very encouraging to see the bi partisianship that is finally rising out of this situation. Homes are a warm market commodity embraced by everyone, not like a stock or bond which is cold and calculating. Balance will always create a better solution. Spring seems to be warming our hopes for a credible future! Now if we can harness the wayward Servicers who are tetering on the brink of a Monoply!?