Lawmakers Seek Less Money Down to Spur Home Sales
By Katherine Reynolds Lewis
A bipartisan group of 162 lawmakers asked federal regulators to scale back a proposed rule that would encourage lenders to require a 20 percent down payment for new home mortgages, saying it “could threaten a full-fledged economic recovery.” In a letter dated May 31, the House members urged the six agencies working on the rule to consider a smaller down payment limit. The proposed rule is one of over 200 set in motion by last year’s Dodd-Frank financial reform, aiming to curb the excessively risky lending that contributed to the real estate bubble and subsequent financial collapse. While many of the proposals have drawn fire from Wall Street and Congress, the down-payment requirement is arguably the most controversial one regarding home mortgages, which were at the heart of the crisis. “This one is certainly the most immediate challenge,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics in Washington. “Everyone is fearful it would clamp down on mortgage lending right at the point when the economic recovery is so dependent on housing.”