Full underwriting and reasonable debt-to-income ratios are a better way to "get back to basics" in mortgage lending than requiring homeowners to make down payments of 10 to 20 percent, the Center for Responsible Lending argues in a policy brief.
The Obama administration’s proposal to shrink Fannie Mae and Freddie Mac’s role in mortgage markets calls for higher down payment minimums heading toward 10 percent. Lawmakers are drawing up their own plans that could be even more drastic.
While the Federal Housing Administration’s 3.5 percent minimum down payment requirements remain in effect for now, underwriting standards have been tightened and premiums raised in an effort to reduce FHA’s market share. Some lawmakers advocate raising FHA down payment minimums to 5 percent.
Mandating larger down payments would harm the economy, housing markets and middle class families, Center for Responsible Lending lobbyist Susanna Montezemolo argues in a policy brief.