Proposed 20% Minimum Down Rule Would Severely Disrupt the Housing Market

Nation’s Building News Online:  A plan unveiled by the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve on March 29 to require a minimum 20% downpayment for “qualified residential mortgages” would disrupt the fragile housing market and jeopardize the struggling economic recovery, according to NAHB.

Along with NAHB, diverse industry and consumer groups and housing finance experts took strong exception to the proposal, pointing out that it could prevent millions of credit-worthy borrowers from buying homes and would be a major setback for the housing industry as it slowly emerges from its worst downturn since the Great Depression.

“By mandating a 20% downpayment on qualified residential mortgages, the Administration and federal regulators are excluding those without huge cash reserves — which constitutes most first-time home buyers and many middle-class households — from a chance to buy a home,” said NAHB Chairman Bob Nielsen.

“Just do the math,” Nielsen said. “First-time home buyers historically average 40% of home-buying activity. It would take an average family 12 years to scrape together a 20% downpayment.

“This plan is nothing short of an assault on homeownership that could have a long-lasting negative impact on housing for generations to come,” he said.

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