Housing Market Recovery

by Bob Schwartz

Housing Market Recovery Termination?

Is our feeble housing market recovery about to die because of new administration rules?

The real estate industry is holding it’s breath as governmental regulatory agencies are considering a 505 page proposal that will create new rules for bond financing of loans for homes, autos and other assets.

The main government agencies involved are: the Federal Reserve, the FDIC, the Federal housing finance agency, the Department of Housing and Urban Development, the office of the Comptroller of the currency, and the Securities and Exchange Commission.

The most onerous new rule being considered is one requiring a 30% down payment or more for new home purchases. Also being considered is a ban against second liens on properties at closing.

Real estate industry critics have said that imposing such new home purchase requirements would force the vast majority of home buyers to pay higher rates and or simply be turned down.

The mortgage bankers Association of America, has said that it estimates just 18% of people who purchased home last year would have been qualified for their mortgages under the new proposals.

Such a high minimum down payment requirement would also have a dramatic impact on different racial groups. It has been shown that nearly 3/4 of African-American buyers put down 10% or less for their home mortgages versus 50% of all buyers. Another survey by the American housing survey, said that 44% of his panic buyers put down less than 5% on their home purchases.

Sen. Johnny Isakson, Republican from Georgia, has said that the regulators drafting the Dodd-Frank regulation should reject the 30% down payment idea because it would be even worse than their original idea of mandating a 20% down payment and would prevent even more Americans from becoming a homeowners!

Naturally, requiring such a large initial down payment would also create severe affordability problem for buyers in high-cost areas such as California, the Northeast and portions of the mid-Atlantic date, including Washington DC.