Isakson spoke on the Senate floor to reiterate to Sheila Bair, chairman of the Federal Deposit Insurance Corporation (FDIC), and other federal regulators that he is very troubled by recent suggestions that they might be considering requiring a down-payment as large as 20 percent for a homebuyer to be eligible for the Qualified Residential Mortgage while failing to address the issue of private mortgage insurance. Isakson, along with Senators Mary Landrieu, D-La., and Kay Hagan, D-N.C., authored the Qualified Residential Mortgage provision of the Wall Street Reform and Consumer Protection Act, also known as the "Dodd-Frank financial reform bill," that was signed into law on July 21, 2010.
According to NAHB (National Association of Home Builders)
Under the Dodd-Frank financial reform law passed last year, lenders are required to have “skin in the game” by retaining five percent of the credit risk of each loan that they sell into the secondary market. The law also called for federal banking regulators to establish rules for a qualified residential mortgage (QRM) that would exempt lenders from these risk retention rules. The Dodd-Frank law exempts FHA and VA loans from the risk retention requirement and the proposed risk retention rules will not apply to Fannie Mae and Freddie Mac while they remain in conservatorship.Where does a young couple getting $20,000 in cash to buy a $100,000 home? Yes, it's good for people to have a substantial investment in their home and community, but is 20% realistic? Certainly 0% down wasn't.
Reportedly purchasers may still be able to obtain PIM insurance but at higher rates. Apparently the FDIC determination will be made in June. That's just before HB87 will become effective, assuming Governor Deal signs.
It should be noted that Sheila Bair, will leave the FDIC on July 8th: http://www.viewheadlines.com/News/Article.aspx?i=250041&t=Bair-to-step-down-as-FDIC-chairman-in-July. Will that alter things?
Some believe the depressed housing market is holding back economic recovery. But ask yourself. If people are still unemployed with few prospects in sight, or if they recently found a new job, won't it be at least one year before they are likely to qualify for a mortgage? The housing issue is likely to persist for some time, possibly a couple of years.
So, housing isn't what is holding back the economy. It's more complicated. Mortgages were possibly too easy to get with zero down, no doc loans. Jobs were exported. AGAIN. Remember when "mill towns" became ghost towns as the mills shut down and those jobs were moved overseas?
Georgian's aren't eager to work 14 hour days harvesting crops in the the scorching sun and high humidity, by hand. Not all crops can be harvested mechanically. They don't live where the crops are grown. And what will they do when Georgia crops have been harvested? How will they earn a living? If they migrate, as our current agriculture work force does, they won't be here spending money. And regardless of education they don't have the skills necessary - they aren't farmers. This country needs to make some changes, become innovative, and find new economic drivers. But that's another issue.
Could the FDIC require Georgia borrowers to meet the 20% down in part because of the state ranking number ONE in the nation for bank failures? That remains to be seen. Stay tuned.
A 20% downpayment for purchasers would no doubt compound housing issues in Georgia. Selling a home will be significantly more difficult. Currently homes remain on the market for extended periods. Some years. Very troubling, particularly with the prospect of so many vacant housing units likely to be coming available.
