Half of the more than 1,000 borrowers surveyed by the National Foundation for Credit Counseling said they would never be able to afford the 20% down payment required under the qualified residential mortgage structure. Federal regulators proposed a rule in March requiring lenders to maintain 5% of the risk on mortgages pooled into securities, except for those loans that meet a variety of standards including a 20% down payment. But the NFCC, a nonprofit credit counseling organization, is pushing back against the rule saying the down payment is too high and would shut out too many borrowers. Regulators say the QRM is designed to be only a small slice of the market, suggesting lenders still would have to retain the risk on most of the mortgages written. Gail Cunningham, a spokesperson for the NFCC, said the amount of borrowers who would ultimately be able to afford a QRM could be even lower than the survey suggests. “Since prices for homes are at historic lows, the necessary down payment represents a lower dollar amount than would typically be necessary,” Cunningham said. “Nonetheless, consumers still do not feel capable of meeting the requirements.” Research from data analytics firm CoreLogic (CLGX) showed similar results. Roughly 39% of those who took out a mortgage in 2010 made a down payment of less than 20%, according to the company’s evaluation of those loans. The NFCC said their survey results show more consumers are dependent on renting even when it’s more affordable to own than to rent in some markets. A recent USA Today analysis of data from the Census Bureau showed more homes are being rented out than sold in 500 cities. “Although renting has many advantages, it may not stimulate the economy as much as an uptick in the housing market world, as renters do not typically spend as much on home improvements, lawn equipment, appliances, or other areas, which would lead to job growth,” according to the NFCC. The comment period on the risk-retention rule expires June 10, and regulators are considering a lower down payment requirement for the QRM. Bob Ryan, the acting commissioner of the Federal Housing Administration has said a 10% down payment may be a more suitable threshold. “Now is the time for consumers to examine their long-term goals as they relate to housing, and take the steps necessary to meet them,” Cunningham said. “Renting may be the right answer for some people, but just because homeownership isn’t on the horizon at the moment doesn’t mean it never can be.” For an in-depth look into the risk-retention rule, pick up the June issue of HousingWire. Write to Jon Prior. Follow him on Twitter @JonAPrior.
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