Lawmakers Propose Restrictions On Lenders Making Loans With Less Than 20% Down

In an effort to avoid a future repeat of the housing meltdown we are currently experiencing legislators have suggested many changes and restrictions to mortgage lending. One proposal that has drawn criticism from both the lending industry and consumer advocates is that which would require lenders to keep 5% of the value of the loans they make with less than 20% down on their books, rather than selling them to investors on the secondary market.

As reported by the New York Times on June 1st, 2011, the American Bankers Association and civil rights groups such as the N.A.A.C.P. are among those opposing this legislation. The concern is that requiring a 20% down payment could restrict home ownership to the wealthy who are able to come up with the cash needed to purchase a home.

In the past few decades we have placed a lot of importance on homeownership in this country. As taxpayers we have invested a lot of money into helping as many as possible achieve this part of the American dream. As families and individuals we worked hard to purchase and maintain homes.

Still, there are downsides to a high rate of homeownership - particularly when times are tougher economically. The population is less mobile, meaning it's not as easy to pick up and move where the jobs are when so much of the workforce owns homes. The other side of that argument is that a less transient population may lead to more stablilty and pride in our communities.

Whether it's better or worse for the country and the overall ecomony for more people to own their own homes is certainly up for debate. It will be interesting to see how this proposed legislation affects the current real estate market. If it looks like it could get passed it might inspire home buyers who were on the fence to buy now while they can still purchase a home with a low down payment. Those who can afford to do so may also be inclined to invest in real estate in anticipation of greater demand for rental properties.