REALTORS® to Federal Regulators

NAR Strongly Criticized the Proposed
Minimum 20% Down Payment Rule

REALTORS® to Federal Regulators: A Narrow Qualified Residential Mortgage (QRM) Classification is Unnecessary to Guarantee Safe, Secure Mortgage Lending

A proposed law by the federal regulators to require a minimum of 20 percent down payments, rigorous debt-to-income ratio constraints and strict credit standards will end millions of Americans from gaining access to secure, low-cost home loans, concurs the National Association of Realtors® (NAR).

In a commentary letter recently submitted by NAR expressed displeasure over the unjustifiably narrow definition of (QRMs) which would be excepted from risk preservation regulations. Non-QRM home loans will have higher rates of interest and fees, creating more expense for home ownership or even unattainable for a great many of the hopeful homebuyers in today's market. NAR suggested regulators to abandon the purported risk retention requirement and to start over.

As the largest advocate for U.S. home ownership, NAR strongly believes it was Congress's intent to create a wide ranging QRM exception, convincing evidence shows that sensible lending standards along with ensuring the borrower’s capability to pay their mortgage have the most impact on cutting down lender risk, according to NAR President Ron Phipps. This intended regulation should be rewritten and published for general public comments. If tis doesn't happen, then millions of reliable, creditworthy homebuyers will be unable to achieve the American dream of home ownership.

The comment letter suggested a several alternatives to regulators. Contemplating the significantly higher loan fees and rates for non-conforming QRM mortgages, regulators should classify QRM to encompass safe and sound loans, tied with proven underwriting and full income documentation along with assets, and demand risk retention for only those loans with risky features such as teaser rates, balloon payments and weak underwriting.

NAR strongly criticized the proposed minimum 20 percent down payment rule, stating it ignores compelling evidence that accountable lending practices while ensuring that a borrower’s repayment ability have the most impact on cutting down lender risk. The low rate of foreclosures for the Federal Housing Administration and the Veterans Administration mortgages, which have the least down payment conditions and relatively low loan default rates, is even more confirmation that the answer to sound lending is sensible underwriting and documentation instead of large down payments. Based upon estimates by NAR, it would take over 10 years for a median income household family to save up enough down payment to get a 20 percent down loan. 10 percent down would require a family in to save excess of eight years. The blow to minority and first-time home purchasers could even be greater

NAR also recommends eliminating the rule’s debt-to-income ratio requirements as the insignificant reduction of defaults is not worth the negative consumer impact.

Concentrating the QRM exception on underwriting issues that do not significantly make loan performance better means millions of potential home-owning families will be unable to qualify to get a QRM loan and alternatively will be required to pay higher fees and rates for non-QRM loans, assuming they can even obtain them,

NAR is in favor of the proposed rule for treatment of government-sponsored enterprises (GSEs) that are in conservatorship. The assurance issued by a GSE will reassure the risk retention obligations. The GSEs are continuing to play an important role in imparting affordable and available loans to potential homeowners during the present economic downturn, and until the statutory and regulatory framework for the GSEs become more comprehensible, the agencies should not compel risk retention regulations that would stop qualified home purchasers from finding honest and affordable home loans and impede any housing recovery.

NAR is also has concern that certain underwriting factors of the risk retention proposed regulations would further reduce credit access for the multi-family and commercial real estate, which could further the U.S economic downturn.

There is wide ranging opposition to the federal regulators’ proposed QRM regulations among housing, banking, and consumer advocacy groups, who have joined together to form the Coalition for Sensible Housing Policy, made up of 46 organizations and is concentrating on bringing attention to the proposed rules.

NAR, "The Voice for Real Estate," is the largest trade association in America, representing 1.1 million members involved in every aspect of residential and commercial real estate. For additional information, go to

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