[Notary Sojac]

Earlier this year, the six federal agencies tasked with drafting the rules added a requirement that homebuyers make a 20 percent down payment to qualify for low-interest mortgages.

This is a good idea and long overdue.

In addition, the new proposals announced this week would cap the amount of income that borrowers could devote to mortgage payments to no more than 28 percent of gross income.

This is a good idea and long overdue.

Worse, it would disqualify any borrower whose combined debt payments amounted to more than 36 percent of monthly gross income.

This is a good idea and long overdue.

[RockinRight]

Financially, yes, but should the government (who was largely responsible for the problem to begin with) force it?

Also, it would destroy what little equity remains since it would essentially take 70% of potential buyers out of the market for two reasons:

1. Fewer have the 20% down

2. Those that have enough equity to sell and “buy up” no longer will after their values plummet even more.

It will basically snowball a decline in home values to far UNDER their likely intrinsic value for a good decade.

Probably something ultimately good would result, but, there will be a LOT of people, probably 40% of the population, who are so far underwater in their homes that the value of their home will likely be less than 50% of their mortgage balance.

I’m not even getting into the income requirements, but analyzing that it seems to be pretty on-target with what most requirements are anyway.

If a private lender without a government guarantee wants to lend at less than 20% down though, why should the government stop them?

[Trust but Verify]

I think these standards swing the pendulum too far in the opposite direction. The domino effect from taking that many buyers out of the market will be disasterous, at least in the short term.

[fatez]

Yes, all good ideas. But the government has no business being in the reale estate market and the financial markets at all. The market should determine whether the person is at risk or not. This is more regulation from central planners...

[ThisLittleLightofMine]

I agree with all these rules, however the US Gov is why there is a mess right now, subprimes loans in addition to Fannie/Freddie owning in incredible amounts of loans. I just found out they own our loan, a normal over 20% down down coventional 15 year. Why are they buying loans like mine?? The gov needs to get out of the loan business.

[ThisLittleLightofMine]

I agree with all these rules, however the US Gov is why there is a mess right now, subprimes loans in addition to Fannie/Freddie owning in incredible amounts of loans. I just found out they own our loan, a normal over 20% down down coventional 15 year. Why are they buying loans like mine?? The gov needs to get out of the loan business.

[Freedom_Is_Not_Free]

You are dead right. We need these reforms yesterday, although I see no reason not to allow a 10% down payment for those with credit scores over 750, but I’m soft on that. 20% works too.

All of this would lead to a later housing bottom and a slower housing recovery, but when it came it would be solid and sustainable.

If the government was serious about getting homes sold, they would lower the barriers to investors purchasing houses. There are a lot of investors out there who are chomping at the bit to buy if the government would sweeten the deal with lower taxes and fees.

[Pelham]

Exactly right. Linda Chavez is advocating the same bad policies that led to the bubble and mass defaults.

[dragnet2]

added a requirement that homebuyers make a 20 percent down payment to qualify for low-interest mortgages.

Well, good or bad, that will eliminate 90 percent of the potential buyers...In this economy? Maybe more.