This post is being written in response to a post that I read in which the author felt that the NAR should not fight the proposed 20% down rule in the QRM.

For starters, people need to understand what got the housing industry in trouble, and be sure to pass out the blame where it deserves to be passed out.  To begin with, the amount down payment has shown to have little to do with whether the mortgage gets repaid or not.  For example, USDA and VA loans are ones which don't require a downpayment by the buyer, yet they are no more frequently defaulted on than conventional mortgages. 

Why do homes get foreclosed?  The simple answer is that they do so when the home owner cannot afford to repay the mortgage.  In many cases, someone bought using an ARM(Adjustible Rate Mortgage), and after the mortgage rate increased, and in many cases doubled, the owner could no longer make the payments.  In other cases, the person responsible for paying the mortgage lost the home after job loss, divorce, or a major expense like medical bills.  In those 3 examples, the mortgage was unlikely to get paid whether they had put down 20% or not. 

I've heard some people argue that maybe we should require higher downpayments on homes above the median home price in the area, so as not to penalize 1st time home buyers.  While that may help in some cases, what about the doctor who just graduated medical school?  I have sold homes to doctors without a downpayment, and I am yet to see one of them default on their mortgage. 

The conclusion I have drawn on this issue can be summed up in very simple terms.  It's not about the downpayment - it's about the ability to repay the mortgage!

 

If you are interested in receiving personalized service from a Fort Wayne Realtor who puts you first, give me a call, or send me an email.  I am always there for both new and previous clients, both before and after the sale.

 

Darren Schortgen, Broker-Owner/REALTOR    
Advanced Realty of Fort Wayne
(260)385-7603
Darren@DarrenSchortgen.com
www.DarrenSchortgen.com

 

6 Comments on Why the NAR is fighting the 20% down rule in the QRM!

MAY
20
2011
145,246 Points

I disagree with your perspective, but I defend your right to have it! Good luck!
1:30pm • #1
235,133 Points Outside Blog Attended Rain Camp Called Shot Master

Great point - Darren.  It would be nice if the powers that be would leave the rules alone long enough to see if they are working before changing them some more.  (PS great to see someone from Ft Wayne on list - I spent three years there while in Graduate School at Concordia Theological Seminary.)
2:02pm • #2

QuickFree,

All comments are welcome, even ones that disagree with my perspective.
10:18pm • #3

Steven,

Thanks for commenting.  I hope you enjoyed your 3 year stay in Fort Wayne!
10:19pm • #4
JUL
13
2011

Darren,

 

I would tend to agree, but really think that any fight at this point is wasted money. The laws are and will be set regardless of what you our I want, but everyone also needs to look at the full bill before jumping, ranting, or wasting funds. There will really not be any big changes as to the way the market has shifted already, the only real issue here is how much more do we want to hand over for the government to control. We have already seen the change back to Government backed (controled) Mortgages, and that is what (IMO) this bill is about. the 20% down rule will not change anything, as it really becomes a "loan qualifing" term for securitization, and we know that wont really change anything as it truly has already been done.

We really should as industry professionals focus on the changes that will be, and how we can/will incorporate this into our daily routine to make sure we are still here when all the dust settles. We have seen an increase 20 fold in FHA, USDA, and VA loans, and really need to shift our business models towards programs available such as the 203K loans to help market our current housing stock, and increase our personal/corporate market share.

 
11:24am • #5

Matt,

In principle, I agree with what you are saying.  We do have to continually adjust to what rules are handed to us, rather than waste money fighting what would be a lost cause.

Have a good day!

Darren
12:11pm • #6


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Darren Schortgen Fort Wayne/New Haven, Indiana Homes (www.Darrenschortgen.com Schortgen Realty)

Darren Schortgen Fort Wayne/New Haven, Indiana Homes

New Haven, IN

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www.Darrenschortgen.com Schortgen Realty

Address: 8424 Brush College Road, Woodburn, IN , 46797

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