The Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency are all supporting a proposal that will require home buyers to put a minimum of 20 percent down in order to obtain a “qualified residential mortgage”, The Wall Street Journal reported this morning.
In addition to the three agencies that already support it, the proposal must also get the go-ahead from the Department of Housing and Urban Development, the Federal Housing Finance Agency and the Securities and Exchange Commission, so whether or not it moves forward is very uncertain.
It is not clear how a “qualified residential mortgage” will be defined, but the article notes that regulators must issue a definition by April. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the sweeping financial reform legislation signed into law last July, a “qualified mortgage” is defined as a mortgage with:
- No negative amortization (when the payment made by the borrower is less than the interest due and the difference is added to the loan balance)
- No large balloon payment (a large balance that comes due at the end of the life of a mortgage)
- Verification of Income (VOI) and Verification of Assets (VOA)
- A debt-to-income ratio based on a fully-indexed rate
- Total points and fees not in excess of three percent of the loan amount
- A maximum loan term of 30 years
What is interesting is that banks across the country already seem to be requiring 20 percent down payments on conventional loans. In mid-February, an analysis for The Wall Street Journal by Zillow.com revealed that the median down payment in nine major U.S. cities rose to 22 percent last year on properties purchased through conventional mortgages. That percentage doubled in three years and represents the highest median down payment since the data were first tracked in 1997.
This article originally published at http://dc.urbanturf.com/articles/blog/20_percent_down_payments_required/3085
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