Legislators Hope To Soften Downpayment Rule

Washington, DC, Feb. 14, 2013 -- Realtors and mortgage bankers hope to get a break from Washington regarding the potential imposition of strict minimum downpayment rules.

President Obama, in his State of the Union message, called for streamlining rules, which are keeping responsible young families from buying their first home.

The main source of concern is the so-called Qualified Residential Mortgage rule, which banking regulators including the Federal Deposit Insurance Corp. and the Federal Reserve are targeting for completion this year.

A preliminary draft required lenders to keep a stake in mortgages with down payments of less than 20% and those issued to borrowers spending more than 36% of their income on debt.

Bankers and consumer groups said that requirement would shut creditworthy borrowers out of the market.

Some legislators want regulators to align the QRM rule with another regulation called the Qualified Mortgage rule, issued by the Consumer Financial Protection Bureau in January.

That rule provides legal protections to banks that issue loans to borrowers spending no more than 43% of their income on debt.

The housing industry wants regulators writing QRM to drop the down payment requirement and raise borrowers’ allowable debt load to 43%, essentially setting the same requirements in both the QM and QRM rules.

Senator Bob Corker of Tennessee is drafting a bill that would merge the two rules, which he'll offer if no action is taken.

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