I am a REALTOR®, working mostly with foreclosure properties. I am on the front lines of both selling and listing affordable homes. While there have certainly been mortgage issues in the past, I know that today's homebuyer with 5 to 10% down is a better risk than the foreclosed homeowners I meet when I am trying to get them to vacate foreclosed properties. Comparing that buyer with today's more-qualified buyer is not an accurate predictor of future foreclosure rates. Most of those people met virtually NO requirements when they purchased those homes with 100% or even 105% loans.
Forcing all buyers to have 20% down will keep many typical first-time owners out of the market, but it will also KEEP the current glut of foreclosed properties vacant and ON the market. Neither of those things will help housing recover. From a social standpoint, there is also a vast transfer of future wealth happening right now as investors out-buy owner occupants. That, also, is a financial and social mistake.
The proposed QRM rule (Qualified Residential Mortgage) includes provisions that would require 20% down payments on new loans, higher ratios for refinancing, consistent debt-to-income ratios, and a requirement to verify borrowers incomes. Obviously, borrower incomes should always be verified; and maybe the DTI ratio needs to be reevaluated. Current and future buyers are being blamed for an economic tragedy that they did not create or in which they are not even participants.
I would be completely OK with applying all of the new QRM standards, however, to home equity lines of credit. That would protect the market and the borrower. Equity credit should be extremely hard to get. It is the most destructive type of credit, right up there with 110% LTV because it almost always creates upside-down owners. Put a stop to that and you will lower foreclosure rates significantly. BUT don't punish people simply trying to buy a home.