The Center for Responsible Lending has warned the proposed down-payment standard for a qualified residential mortgages (QRM) could either push 60% of creditworthy borrowers into higher-costing loans or deny them any access to homeownership.
According to ‘Balancing Risk and Access: Underwriting Standards for Qualified Residential Mortgages’ – a new study produced by the University of North Carolina Center for Community Capital and the Center for Responsible Lending – the proposed QRM requirements would have a deleterious effect on nonwhite borrowers; the study estimates that 75% of African-American and 70% of Latino borrowers would be unable to obtain fairly priced mortgages.
Although the study credits the Dodd-Frank Act's ban on loans with the highest risk of default (i.e., those with prepayment penalties or no income documentation) as addressing part of the underwriting problems that fed the housing crisis, the additional down-payment threshold set by the QRM requirements ‘would do little to reduce defaults relative to the large number of creditworthy home buyers it would push from the market.’
The full study is available online. (link)