Pressure on to define minimum down payment loans

Housing industry officials have begun extra efforts to lobby how regulators will define low-risk loans that will be exempt from the five percent risk retention requirement – so-called “qualified residential mortgages,” or QRMs.

The Dodd-Frank bill made no specific reference to down payments, instructing federal regulators to draw up a QRM definition using criteria such as loan type, verification of the borrower’s ability to repay, full documentation, and mitigating factors like mortgage insurance.

The first proposal – in which borrowers would be required to have a 20 percent down payment – sparked criticism from not only the lending industry, but consumer organizations and civil rights groups who said it would raise the cost of borrowing for middle-class and minority homebuyers.

“We don’t have a down payment problem in this country, but rather an underwriting problem,” said Senator Johnny Isakson, R-Ga., a former Realtor who added that regulators did not follow what he said was Congress’ legislative intent in passing the Dodd-Frank bill.”I strongly urge regulators to rework their overly rigid down payment requirement for QRM. If left as is, it would make recovery in the housing market almost impossible.”