Keep Down Payment Amount Flexible, NAR Testifies

December 21, 2018

A bill to reform the secondary mortgage market got a hearing today in the U.S. House, and the National Association of REALTORS® thinks it hits a lot of the right notes although it could be made better, NAR President-elect Vince Malta testified today.

Vince Malta with Rep. Jeb Hensarling

© National Association of REALTORS®

Vince Malta, president-elect of the National Association of REALTORS®, left, with Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee, right.

In an appearance before the House Financial Services Committee, Malta said the Bipartisan Financing Reform Act of 2018 maintains an explicit federal guarantee for conforming conventional loans, as NAR has called for, and makes other reforms that NAR supports.

To make the bill better, though, Malta recommended lawmakers leave out a minimum 5 percent down payment requirement, because responsible, creditworthy households shouldn’t be prevented from getting safe and affordable conventional financing because of a hard and fast rule on down payments

In any case, Malta said, “the amount of the down payment by itself is a weak predictor” of credit performance.

Other changes that would improve the bill, which was introduced by Rep. Jeb Hensarling (R-Texas), the committee chair, include a transition period to the new system and more regulatory flexibility, including to the implementation of the qualified mortgage definition. The qualified mortgage is the conventional conforming mortgage that meets standards for backing by the federal government.

Malta also encouraged lawmakers to act on an NAR proposal to create a mortgage market liquidity fund, which would set aside a portion of the profits to the secondary market entities to help stabilize the companies if needed so they don’t have to draw on U.S. Treasury funds.