Yes, but a decent underwriter would be able to take that into consideration.
A 10% downpayment is more reasonable.
But “forcing” a 20% downpayment is just silly.
Again, the government has no business directing a private business on how they should conduct themselves. The mortgage business worked just fine for a couple of hundred years.
And you're right. Banks are in the business of making loans at an interest rate commensurate with the risk. The higher the risk of a loan to an individual, the higher the interest rate for that loan.
But to the swells in Washington, that's "racist."
Eric Holder's people have historically had a much higher default rate than any other group, which means they were being held to a lower standard.
And even that wasn't enough. Nothing will be enough except handing them free stuff forever and always Amen.