Roughly 39% of homebuyers in 2010 made a downpayment of less than 20%, loans that may not have been made had the current risk-retention proposal been in place, according to data from CoreLogic (CLGX)
Regulators proposed a rule in March
requiring lenders to maintain 5% of the credit risk on loans, including mortgages, that are packaged into securities. The exception is the qualified residential mortgage, which among other standards, must include a 20% downpayment from the borrower.
While rule makers intended the QRM to maintain a narrow slice of the market, a variety of trade groups and lawmakers began an effort to lower that downpayment figure. But even if it was lowered to 10%, as Federal Housing Administration
Acting Director Bob Ryan suggested to Congress
, the impact would still be widespread. Nearly 25% of homebuyers in 2010 paid less than 10% down, CoreLogic said.
"While clearly higher down payments are necessary and will reduce longer-term risk, using the consensus 20% down payment scenario, it will lead to more sluggish sales in some states in the short-term," CoreLogic said.
Nevada would be the most affected. The state has not only the highest foreclosure rate, but the lowest number of 80% loan-to-value mortgages, meaning the borrower had at least 20% equity in the home. In 2010, only 20% of Nevada borrowers met the QRM requirements.
Other states such as Arizona, Florida and Georgia would be affected as well. But states like New York, Hawaii and North Dakota had a relatively high percentage of borrowers with at least 20% down.
A group of 15 trade groups including the Mortgage Bankers Association
and the National Association of Realtors sent a letter to regulators
late last week asking to delay the risk-retention rule by roughly one month.
Regulators are reviewing the request. The comment period is currently scheduled to end June 10.
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