Explore Properties at Southern California: Government's Proposed QRM Strict Home Mortgage Loan Down Payment Guideline

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Some people have argued that the leading cause of foreclosure in America was poor underwriting by the lenders and that we need a stricter government standard on lending.

U.S. law - the Dodd-Frank financial reform act of 2010 - says that borrowers must make a 20-percent or more down payment in order to be deemed a "qualified residential mortgage" (QRM). According to this, if a mortgage isn't labeled a QRM, the lender must retain five percent of the loan risk. qrm rule proposed

If this QRM rule is implemented by the FED, we expect widespread and adverse impact on the U.S. housing industry, which would not be welcomed during our challenging economy times.

This government proposed QRM standard (possible requirement to be implemented by the FED) would require a 20% down payment for government loans other than FHA and VA.

But there isn't a link between history of down payment size and whether the loan performs. FHA (good lending platform that supports itself) and VA loans boast low default rates, and they have the lowest minimum down payment requirements.

People who like the QRM rule want to encourage lenders to stay away from risky loans. That part sounds OK.

But a 20-percent down payment rule will have a certain result of tighter credit for buyers, more challenges for buyers and fewer homes being sold. Borrowers will have a much more difficult time getting a loan.

Lenders should make decisions on home loans based on the whole picture of a borrower and not only how much money they have for down payment.

If the QRM 20% down payment rule is implemented by government, the average American family will need years to save for down payment to buy a home.

Most real estate professionals and those associated with the National Association of REALTORs® NAR logo contend that home ownership has helped to build our nation and made it strong, that government should protect consumers and our economy moving forward with good policies on home loans and mortgages and not jump to the simple requirement of 20% down payment.