Thursday, September 8, 2011

Isakson Urges Regulators to Reconsider 20 Percent Down Payment Requirement for Highly Qualified Homebuyers
Warns It Would Be the 'Last Nail in the Coffin for the Already Crippled U.S. Housing Market'

WASHINGTON – Testifying before a House Financial Services subcommittee, U.S. Senator Johnny Isakson, R-Ga., today again urged federal regulators to revise their proposed 20 percent down payment requirement for Qualified Residential Mortgages. Isakson warned that the regulators' proposed rule would prevent highly qualified homebuyers from purchasing homes, further crippling the nation's struggling housing market.

Isakson was invited to testify to the House subcommittee because he has more than three decades of experience in the housing industry.

Isakson worked with Senators Kay Hagan, D-N.C., and Mary Landrieu, D-La., to include a provision exempting Qualified Residential Mortgages (QRM) from a provision in last year's Dodd-Frank Wall Street Reform and Consumer Protection Act that requires originators to retain at least a 5 percent interest in loan pools, known as "risk retention," sold to investors. Their provision was intended to ensure that highly qualified homebuyers have access to affordable home loans.

The financial regulators who are preparing to implement this provision have proposed that homebuyers must come up with a 20 percent down payment in order to qualify for the exempted mortgages.

"If this rule goes into effect as it has been proposed, it will be the last nail in the coffin for the already crippled U.S. housing market because it takes as many as 40 percent of buyers out of the market. The American people are frustrated with the state of our economy, and things will not get better until housing rebounds," said Isakson. "Poor underwriting led us into the housing crisis, not down payments. The only way housing can recover is if we have a competitive, viable marketplace, which will require well-underwritten, accessible financing."

Lawmakers and various industry and consumer groups have called on regulators several times this year to revise the proposed 20 percent down payment requirement, insisting that the regulators did not follow the Congress' legislative intent and explicit recommendations to require a sensible down payment. In March, Isakson, along with Senators Landrieu and Hagan, led a bipartisan group of 39 Senators in writing a letter urging federal regulators to avoid restricting credit to middle class families working to own a home. Over 250 members of the U.S. House of Representatives joined together to write a subsequent letter opposing the rule.