Effects of mandatory down payments examined

A recent survey indicates that many potential borrower could be locked out of the housing market if there were to be a new lending regulation for federally-mandated down payment standards.

A recent survey indicates that many potential borrower could be locked out of the housing market if there were to be a new lending regulation for federally-mandated down payment standards.

According to the study by the Center for Responsible Lending, as many as 60 percent of currently qualified borrowers would be forced into high-cost loans or out of the running for qualification altogether.

Regulators are examining the pros and cons of setting the down payment limit at either 10 or 20 percent. However, according to the Center, the new regulation could result in fewer mortgage defaults, but the payoff would be fall less than allowing more households to qualify.

Demographically, it was indicated that the new regulation could be particularly damaging to minority borrowers. It's believed that a mandatory 20 percent down payments would exclude an estimated 70 to 75 percent of minority borrowers who would have have a fair chance of becoming successful homeowners otherwise.

Meanwhile, a recent study by the UNC Center for Community Capital found that an elevated down payment limit would do little to reduce the rate of mortgage defaults, and only push creditworthy borrowers out of the marketplace.



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