Why Mortgage Down
Payment Requirement Is So Hard to Relax
Even as Washington explores strategies to improve access to credit, lowering down-payment criteria for mortgages continues to be ignored as a potential solution. March data, for instance, show that purchase mortgages with loan-to-value ratios between 96 percent and 100 percent made up the smallest slice of the origination market since at least 2000. Fannie Mae and Freddie Mac now require a minimum 5 percent contribution from most buyers, and while the FHA will insure loans with equity as low as 3.5 percent, rising premiums are making its products more costly. The industry is worried about losses from defaults, which are much greater on low-down payment mortgages. But National Association of Hispanic Real Estate Professionals President Jason Madiedo says even a slight drop in the requirement could be a huge help to borrowers -- especially in the Latino community. Moreover, he adds, "I don't think down payment amount has been as big a factor as income and credit portfolio in the performance of a mortgage."
From "Why Mortgage Down Payment Requirement Is So Hard to Relax"
American Banker (06/13/14) Sinnock, Bonnie
Even as Washington explores strategies to improve access to credit, lowering down-payment criteria for mortgages continues to be ignored as a potential solution. March data, for instance, show that purchase mortgages with loan-to-value ratios between 96 percent and 100 percent made up the smallest slice of the origination market since at least 2000. Fannie Mae and Freddie Mac now require a minimum 5 percent contribution from most buyers, and while the FHA will insure loans with equity as low as 3.5 percent, rising premiums are making its products more costly. The industry is worried about losses from defaults, which are much greater on low-down payment mortgages. But National Association of Hispanic Real Estate Professionals President Jason Madiedo says even a slight drop in the requirement could be a huge help to borrowers -- especially in the Latino community. Moreover, he adds, "I don't think down payment amount has been as big a factor as income and credit portfolio in the performance of a mortgage."
From "Why Mortgage Down Payment Requirement Is So Hard to Relax"
American Banker (06/13/14) Sinnock, Bonnie
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