Mortgage credit has remained tight since the housing crisis. The response was intended to ensure sound, well underwritten mortgages were provided to buyers, but an unintended consequence was that many buyers were locked out of home financing. Recently, Fannie and Freddie regulator FHFA said that they would take steps to expand credit for the purchase market, including backing loans with down payments of 3%, down from today’s 5%. And, federal agencies approved the final QRM, or qualified residential mortgage, rule that removes a once proposed requirement of a 20% down payment. Finally, individual mortgage lenders began announcing earlier this year that they were easing their loan requirements. (For a thoughtful commentary on the complexities of all these changes and what they mean to buyers, read this post in the WSJ Banking blog.)
— Nick Timiraos (@NickTimiraos) October 27, 2014
As we await more details on the FHFA plan, the recent mortgage news has given fire to the old myth that low down payments are what caused the housing crisis.
The housing crisis was caused by mortgages with short term arms, no-documentation and other exotic features often not understood by the buyer. keep reading