Coalition against home down payment increase

Group protests prospective hike in the amount of down payment required for home purchase

A coalition of industry organizations and consumer advocates expressed their concern to the Obama administration over changes in the down-payment requirements that may result from the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Center for Responsible Lending, the Consumer Federation of America, the National Association of Realtors, and the National Association of Home Builders sent a letter to various, highly-placed administration officials, such as Treasury Secretary Geithner, Federal Reserve Chairman Bernanke, and the heads of HUD, the FDIC, the SEC, and Office of the Comptroller of the Currency.

The letter expressed deep concern that a hike in down-payment requirements will harm the consumer, hamper growth in the housing sector, and adversely affect the overall economy. The coalition acknowledged a need for a ‘reasonable and affordable cash investment requirement" that, coupled with other underwriting factors would reduce the level of mortgage default. The letter made clear that the kind of hike in the down payment percentage that is rumored, in the 10%-20% range, will end up leaving ‘hundreds of thousands of credit worthy households excluded from home ownership. Not only do most households lack the ability to come up with a high down payment, but a severe hike in the down payment requirements could make it very difficult for the average American to save enough over time to accumulate the required down payment.

The coalition feels that prudent mortgage loan underwriting should take into account a layering of a wide variety of risk factors and not focus arbitrarily on increasing the required down payment. The coalition points out that "millions of low down-payment loans have been originated safely for decades" and can continue to be made "to qualified homebuyers on a safe and sustainable basis."

The strongly worded letter stated that a hike in the down payment requirements "would make a near-term housing recovery almost impossible." The letter concluded that an increase in the down payment requirements "thwarts the will of Congress, impedes the economic recovery and unnecessarily burdens American homebuyers."