Penalizing Responsible Consumers

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Penalizing Responsible Consumers

The government is hampering the housing recovery by placing additional risk-retention requirements on the banks/lenders.

The policy will prevent more employed middle-class citizens from becoming homeowners...they will be priced out of the market.

Federal regulators want to put pressure on the banks/lenders with regards to their foreclosure's a little late.

Unfortunately the policy will deter homeownership.


 “High down payment and equity requirements will not have a meaningful impact on default rates. But they will require millions of consumers, who are at low risk of default, to either put off buying a home or pay unnecessarily high rates," according to a statement from a coalition including the Mortgage Bankers Association and the National Association of Home Builders. "The government is penalizing responsible consumers, making homeownership more expensive or simply out of reach for millions. We urge regulators to develop a final rule that encourages good lending and borrowing without punishing credit-worthy consumers.”

The Bottom Line:

 There are many arguments on all sides with the new regulations implemented to safeguard the market in the future and heavy financial penalties to pay for the wrongs of the past, but as foreclosure activity begins to pick back up again combined with a weak housing market, the focus needs to be on the present and what exactly can be done to jumpstart home sales and encourage banks to initiate affordable loans to those who are qualified.


Comments (4)

Donald Reich
Prudential Centennial - New Rochelle, NY

Valid points, but, if we had high down payment requirements 5-10 years ago, then we wouldnt be having as many homeowners underwater today. There may not be fewer foreclosures, but there would be fewer short sales.

Apr 15, 2011 08:38 AM
Scott Silverstone
William Raveis Real Estate - New Haven, CT, Connecticut Luxury & Waterfront Realty

It all comes down to risk management.  When there was a lack of standards, high risks were taken and loans were granted that should have not been given.  We are now at a point where they are mitigating risks by making standards so high that many borrowers and homes for sale do not qualify.  I'm ok with a more conservative housing market as long as the market becomes stable and lending practices are fair.

Apr 15, 2011 08:39 AM
MJ Anton
Ormond Beach, FL

@ Donald...I definitely will NOT disagree with higher downpayments in the past...but we can't change the past, many mistakes were made, we need to look to the future

@ Scott...I believe in "common sense" underwriting, if a borrower deserves a loan they get a loan...don't make the "good" suffer because of mistakes of the past.  Not everyone has earned the right to own a home.

Thank you both for taking the time to comment

Apr 15, 2011 09:01 AM
Dora Griffin
D A Griffin Financial.LLC - Fort Thomas, KY
NMLS 6380

EVERYTHING that has been done in the last two years has penalized the responsible borrowers. I would have never considered in 2008 that three years later I'd see loans turned down for ridiculous reasons and scrutinized to the point of jeopardizing long standing relationships.

I'm sure the next change will serve to further punish the most qualified borrowers.

May 04, 2011 07:36 AM