The motivation is clearly to address the deflation of property values, risk of foreclosure and the necessity to revisit a nationwide real estate bail out again in the future.  According to CoreLogic’s recently released statistics, approximately 2.7 million borrowers made down payments of less than 20% in 2010.  Of today’s current homeowners, 10.8 million have outstanding mortgages with less than 20%; an additional 11 million currently owe more than their home is worth. That means that 24.5 million people could never be move up buyers under this proposal.

The National Association of Realtors is strongly opposed to this measure noting that it would take the average household 10 years to save for a modest 10% down payment.  Even lending institutions understand the fatal flaw in this logic but need to come to grips with a loss in equity should our economy endure another real estate downturn in the future.  Is this the time to pass such radical regulation?   Consider that much of the foreclosure stock is being erased by purchasers who are grateful to purchase at adjusted home prices but as a majority, have done so with less than 20% as a down payment. 

The Federal Home Administration has been the agency where borrowers will flock to seek relief from the 20% down rule.  At this time, the FHA requires only a 3.5% down payment for qualified buyers.  This agency however has begun to withdraw from being the agency of last resort since the risk associated has become too great for this one institution to bear.  Industry advocates with a vested interest in vibrant home sales will enjoin on the battle front to convince decision makers that we need to find common ground so that a whole new generation of buyers as well as move up and side-ways buyers are able to be continued home purchasers. 

For more information visit our Goodwin Realty Group website