Defining a Safe Mortgage: Has It Gone Too Far?

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Reading your comments, I agree with both. I, too, had the 20% restrictions and capitalized on my real estate investments... I was one of the fortunate few who bought and sold at the right time.
I sell real estate; I am a Broker since 1989. I remember telling a lender in 1991 "if you would make people put a reasonable amount down, you wouldn't see the defaults. Buyers need to have a part in the risk; real estate is not liquid."
I still think that. But I also see that since 1990, wages have not increased that much, and home prices have (even in this market, compared to 1990). The cost of living HAS increased. With higher home prices and all other cost higher, it is much more difficult to save the money for a down payment.
I think there is a more moderate equation that could be formulated for QRM - a meeting in the middle.

Terri of CA 9:07PM July 12, 2011

It is nice that Meg thinks this plan makes sense (especially considering that she would not be where she is today if QRM has existed in 1980). But 20% of a home in 1980 is nothing compared to 20% prices. Not many 1st time homebuyers will be able to come up with this kind of cash. (and it is a good thing for Meg, that there was NO QRM regulations when she SOLD her 1st home in 1985 - if there had been, the number of qualified buyers to purchase, at double what she paid - would have been severly reduced! And I bet good old Meg did not worry about the qualifications of her next buyer when she sold her house in 2005, at the height of the housing bubble!) Meg seems a bit self-rightous in her comments about how they "planned" so well, that they could retire early - but it was the MARKET that made her a nice retirement package - not brains. QRM will reduce the number of qualified buyers, which will reduce homes values and cause the market to stagnant even more. Good old rule of supply and demand - if there is no demand (i.e. no buyers who qualify) then values drop until you reach a point where there is a demand. So Meg - you would probably not be so well off as you are today, had there been QRM. FYI - home loans < 20% down have been around for last 50+ years. In 1976, if you had good credit - there were conv loans with as little as 5% down; FHA loans with 2.5% down and VA loans w/0 down. So - Meg - if you had good credit, your 20% down was a choice - not a requirement. Read the stats - down payment is NOT what caused this issue. Statisically, the best performing loans over the last 20 yr (including the last 5 yrs) have been VA loans w/no money down. The really tragic side to all of this - there WERE federal regualtions in place to prevent what took place, but they were not enforced or they were pushed aside. As an example - 1996/97 the Clinton Admin decided that it was everyones RIGHT to own a home and pushed banks/Fannie Mae/Freddie Mac & FHA to lower their standards so that home mortgages were within everyone's reach - even if those buyers demonstrated bad credit (similar to grading on a curve - if everyone is at the bottom - then lower the bottom!) Then greed took over, when the number of "eligible" buyers increased by 20%+ (lowering the standards, caused an increase in the number of eligible buyers, which increased the demand for housing; which pushed home values up - again supply & demand). Instead of one or two possible buyers - sellers were seeing as many as 8 to 10 buyers - which drove the price up! Reasonable lending is important and the regulations to make sure that happens have been in place for 35+ years - but what good is a regulation if the regulators don't enforce them or alter them in their effort to give everyone the "American Dream of Homeownership"? We need to stop trying to reinvent the wheel and just go back to the way we did business before 1995. And Meg - just be glad you bought & sold when you did!

JMALON of MD 5:35PM June 19, 2011

When we bought our first house in 1980, we had to prove that we 1) were credit worthy, 2) had 20% down payment (not financed) or gifted, 3) our mortgage payment was less than 28% of our income.
Do you know what happened? We qualified for a 30-year fixed rate mortgage at 11.5%. We bought a smaller home because we didn't want to be struggling for every penny. Over the 5 years we lived there, we upgraded the kitchen, put on a new roof, replaced the heating system, and sold it for nearly twice what we paid for it.
Then, we used that profit + more savings & bought a bigger house. We lived there 20 years, but had a 15-year bi-monthly mortage, again at 11.5%. We were able to refinance when the rates went DOWN to 9%, again with a 15-year bi-weekly mortgage. We paid it off early.
When we retired, we sold that house and moved to a smaller, semi-custom house, PAYING CASH for that house, and still having a profit left to live on.
This is what happens when you live within or below your means. You get to retire early and enjoy life.

meg of AZ 1:11PM June 19, 2011

Go ahead and require larger down payment loans and watch what millions of 401K account holders do. They will cash out their 401k accounts in order meet the stiff down payment requirements, which will surely bring the financial system to its knees.

C Tilford of CA 2:49PM June 18, 2011

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thomascruz44 of CA 3:44AM June 18, 2011