by Ethan Handelman, National Housing Conference
Senators Johnny Isakson (R-GA) and Jeff Merkley (D-OR) both emphasized the need to revise the proposed qualified residential mortgage rule (QRM) to remove the 20% downpayment requirement. The senators spoke at a policy event hosted by the National Journal, “Underwater: Washington’s Role in Keeping Underwater Homeowners Afloat” to highlight the challenges facing our housing finance system.
Senator Isakson mentioned QRM as one of the constraints blocking a housing recovery, noting that restoring consumer confidence in housing requires that mortgage credit be accessible broadly and that lenders and investors have certainty in regulation. Senator Merkley made similar points and further emphasized that focusing on downpayment is a “misdefinition of the problem,” because low-downpayment lending can be safe and successful.
NHC and a broad coalition of housing groups have spoken out to oppose the downpayment restriction in the proposed QRM rule (see NHC’s comment letter and coalition efforts). Regulatory action is still pending, and there has also been legislation introduced, for instance, in Senator Isakson’s pending mortgage finance reform bill which would change the statutory definition of QRM. A recent study reinforced the concern that high downpayment requirements would exclude many for little reduction in default risk.