The dems were right on this one. I do NOT want the government getting involved in how me and the person lending me money come up with a mutually agreeable down payment.
Sure, in a world where there's no Fannie or Freddy.
To be consistent, they should also not get involved in whether the banks lend to minorities with bad credit, and not bail out banks which fail due to poor lending policies.
That would be a fine sentiment, if there weren’t the incredible moral hazard that the government will come in after the person lending you the money goes belly-up from all the loans issued to subpar borrowers. So long as the instutition ITSELF bears the credit risk, then ok, no limits on what kind of contract you can agree to. But if the government (i.e., my pocketbook) is going to implicitly guarantee your loan, then I (as actual lender of last resort) would insist on better terms, such as much higher down payment participation.
Sorry, the government (local, state and federal) is already involved up to their eyeballs. Most closing documents are government forms nowadays. Google "RESPA"
The dems were right on this one. I do NOT want the government getting involved in how me and the person lending me money come up with a mutually agreeable down payment.
When the bank has FDIC insured deposits you have to though.
I'm good with that, if (1) you aren't getting an FHA/Fannie/Freddie/VA government loan guarantee, (2) none of the money comes from any FDIC covered deposit, (2) no MBS type product containing that loan is ever sold to a pension covered by a government guarantee.
95 percent of new mortgages end up going through some government agency in some way. I don't see the actual wording of the proposal in the article, but having the government put a minimum on acceptable down payments for a guaranteed mortgage, or one made directly by the government makes sense to me.
Of course, there is the possibility that the proposal was phrased in the draconian manner (all mortgages everywhere) just to make sure the reasonable variant (government provided or guaranteed mortgages) doesn't happen.
Right now, the government is responsible for 90%+ of the US residential mortgage market. Fannie, Freddie and FHA are buying over 90% of the secondary market out there.
Since we taxpayers are the ones who are having to make up the losses on GSE RMBS paper in their portfolios, I’m quite content to place strict limits on what is acceptable paper for we, the taxpayers, to buy from the loan originators.
The only way I’m cool with the situation you describe is if your lender retains your note. If they’re calling all the shots on the down payment and credit requirements, then I, as a taxpayer, do not want the GSE’s buying your note. That way, your bank has to determine how credit-worthy you are, because if you default, you’re taking their money - not the taxpayers’.