Los Altos Real Estate Blog

The residential real estate market has spent the last 4 years digging itself out of a meltdown that is unlikely to be completely sorted out for at least another 4 years as foreclosures and short sales which have consumed millions of people.  This was all caused by loose lending standards to unqualified buyers who bought properties as "investments" with little or no money down loans.  The parade of "liars loans" and others with 3-5% down made homeownership a joke and lined the pockets of mortgage brokers, builders, and agents from coast to coast.  The wave of greed resulted in a wake of destruction that send the world's largest economy into a tailspin.

Have we learned nothing?

Congress is working on legislation to define rules for a Qualified Residential Mortgage which includes provisions that would require 20% down payments on new loans, higher ratios for refinancing, consistent debt-to-income ratios, and a requirement to verify borrowers incomes.  The rules do not apply to Fannie and Freddie loans, which constitute 90% of the market but there's a belief that the QRM standards will have an impact of the overall quality of the loans.  The belief is that these rules will improve the quality of the loans made and thus result in fewer foreclosures down the road.

NAR is fighting this legislation.  Why?  Because of their ill-informed belief that requiring higher down payments will put mortgages and home ownership out of reach for the middle class.  This position is dangerous and puts NAR in a position of advocating homeownership at the expense of the greater good.  While it's fine that we encourage more homeownership, the truth is that having people who are clearly unqualfied to buy a home do so merely puts the economy in danger, just as we did 4 years ago.

The idea that we have some moral obligation to let someone buy a home with 3% down is reprehensible.  Regardless of who you are or what you do, nothing should enable a buyer to put less than 20% down on a house.  There's nothing in the constitution that says everyone needs to own a home.  My generation had to put 20% down and worked hard to do it.  The current generation seems to think otherwise.  If NAR is successful in blocking this legislation, all they'll be doing is setting us up for another market collapse somewhere down the line.

UPDATE:  As you'll read in the comments below, it's clear that many people advocate less than 20% down but with strict debt-to-income ratios (traditionally 28/33%).  I support those positions, within reason.  It's clear that the ability to pay is as important as down payment, of course.  It would be nice if NAR worked with Congress and the banks to advocate a balance that works for the diverse markets around the country instead of outright blocking the legislation.

VISIT THIS ARTICLE TO VOTE ON LOAN TERMS IN PLACE OF QRM!

Can you define a well qualified buyer for the QRM rule!

http://activerain.com/blogsview/2310454/can-you-define-a-well-qualified-buyer-for-the-qrm-rule-