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Posted at 9:40 AM ET, 02/11/2011

What do you think of Obama's housing policy proposals?

By Washington Post Editors

The Post's Zach Goldfarb reports that the Obama administration has, among other measures, proposed reducing the size of mortgages Fannie and Freddie can purchase and phasing in a 10 percent down payment requirement for the companies.

By Washington Post Editors  | February 11, 2011; 9:40 AM ET
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I'm torn about this. Common sense says that homebuyers should put at least 10% down and that the gov't should not help you out (yes, Veterans should also be included with the rest of us).

Then again, our tax code basically tells everyone to get a mortgage... so in that sense, the gov't should help people get that mortgage.

So I'd say it should be one or the other... get ride of the mortgage interest deduction and get gov't out of the homeownership industry. Or keep gov't involved. The hybrid approach isn't working.

Posted by: jackstrawdc1 | February 11, 2011 10:35 AM | Report abuse

Potential homowners need skin in the game! 10% down is the very least that is necessary!!! 20% is probably more like it.

Not everyone is financially sound enough to own a home, especially if taxpayers will be asked to bail them out if they default.

Posted by: Jimbo77 | February 11, 2011 10:50 AM | Report abuse

Yes, homebuyers should have some skin in the game. Then maybe they won't see it as a game. Speculative home buyers should have to put down a minimum of 25%. Then there won't be so many properties being "flipped", driving up the prices.

Along with phasing in the 10% down payment, the mortgage deduction should be phased out. Why should I get a tax break for keeping a roof over my head when those who rent are not afforded the same break?

Posted by: Anonymous | February 11, 2011 11:32 AM | Report abuse

Doing away with the mortgage interest deduction and mandating a much higher down payment would destroy a massive amount of wealth and affect just about all of us in a significant way. Home prices would further crash, and instead of taking a matter of years for prices to recover, it would take a generation or more. I don't know what the exact solution is, but you can't tell the government to just get out of housing after it has been such a key part of the industry for so many years. I'm a pretty conservative person in theory, but the practical side of me says government has to be involved unless you want to send our standard of living back to the dark ages.

Posted by: Anonymous | February 11, 2011 12:40 PM | Report abuse

Neither Canada nor Australia have Fannie Mae distorting the housing market. There should be no role for the government in the mortgage market. The government's job should be to help the disabled or below poverty line Americans with housing/shelter and that can include subsidized rental apartments. Have we not already created havoc by distorting the market. Why should housing interest rates be tax deductible but not other forms of investment. This forces people to buy rather than rent and prevents people from moving for better job opportunities. Thus this distorts the job market as well. Mortgage deduction for you means some one has to be taxed and that money given to you. Let us get government out of our lives and the let the economy thrive and create jobs and raise everyone's boat.

Posted by: upnorth85 | February 11, 2011 1:16 PM | Report abuse

Requiring a significant downpayment for a mortgage has much to recommend it, and it is not a new concept. Widespread use of no/low downpayment mortages is a relatively recent concept.

Most of the folks without the resources and self-discipline to save up a 10% or 15% downpayment do not have the capacity to reliably manage so large a financial commitment. It is much harder to finagle the downpayment than it is to finagle the credit check, so the downpayment requirement has an inherent tendency to sustain sound credit underwriting standards.

Asset bubbles require a continually increasing supply of ready cash or cash-substitutes to sustain their growth. Bubbles collapse when the cash or cash-substitutes start to run out. No/low-downpayment mortgages and adjustable-rate mortgages with low initial teaser rates are mechanisms for substituting debt for ready cash. Requiring a substantial cash downpayment on a mortgage goes along way to preventing asset bubbles from getting too big before they burst.

Until fairly recently a 10% downpayment requirement was almost universal, and was absolutely required for government backed mortgages. The late crisis might not have happened at all, and it certainly would have been much less severe (less bubble expansion, more equity margin, better credit risks)if substantial downpayments been a requirement.

Posted by: Publicola | February 11, 2011 1:47 PM | Report abuse

If anyone wants a government guarantee for their mortgage they should abide by the pre-deregulation standards for FNMA. Anything less and you are on your own. The banksters will be happy to take care of you.

Posted by: oldguy9 | February 11, 2011 1:55 PM | Report abuse

This isn't a question to which there is, or should be, a cut-and dried, yes-or-no, answer.

The right answer to the down payment question should be driven by the relative volatility of the housing market. When housing prices are in states of rappid flux, as they were in the early years of the 21st century, down-payment requirements should be increased. Down-payment requirements should be increased in down markets, to assure that the homeowner doesn't find his mortgage immediately upside down. Down-payment requirements should be raised in up markets, both because of the increased risk of a market bust, and because increasing down-payment requirements will help to cool the market off.

On the other hand, down=payment requirements can, with relative safety, be reduced under conditions of strong price stability, because the risk of mortgages going upside-down is relatively slight.

Think about how the market works before you pose such a question to amateurs, and pose the question in a way that helps to educate the reader, rather than simply soliciting an unqualified and uninformed opinion.

Posted by: lonquest | February 11, 2011 2:04 PM | Report abuse

There is a reason why there is something called PMI, which until a few years ago, was not tax-deductible.

What it comes down to is that a loan should not exceed 90% of the value of the property. An arbitrary 10% down is a cruel joke.

The reason for the home implosion? The Community Reinvestment Act, brought to you by Jimmy Carter and put on steroids by Bill Clinton, compounded with Alan Greenspan's irrational exuberance of raising the Fed Funds Rate, every quarter, with the support of "Dickie" Fisher.

Posted by: Computer_Forensics_Expert_Computer_Expert_Witness | February 11, 2011 2:08 PM | Report abuse

Things to consider...if the govt gets out of the mortgage biz, then why would the banks pump money into a product that for every $10 they invest they only yeild $1? The backing has to be there otherwise the 30yr fix market dries up over night.

The second impact of little government backing is for all of those who end up renting b/c they can't afford the 20 to 30% down. Well guess what those who do buy properity to rent are going to pass the huge down payment/higher mort rates onto the renter. In a sense keeping a nice chunk of the middle class renting forever.

The real fix would be require better loan products AND go after fraud. How many of those foreclosures were for landscapers making 140k a year?

10% down is a fair number....but a more fair approach would be those bah-jillion dollar Mc Mansions are never to be backed by the govt. Its all on the banks.

Posted by: Anonymous | February 11, 2011 2:33 PM | Report abuse

(1) And there the right-wing goes again spouting their fantasies and lies with this:

"The reason for the home implosion? The Community Reinvestment Act, brought to you by Jimmy Carter and put on steroids by Bill Clinton, compounded with Alan Greenspan's irrational exuberance of raising the Fed Funds Rate, every quarter, with the support of "Dickie" Fisher.

Posted by: Computer_Forensics_Expert_Computer


FACT: Community banks were NOT the ones making the too-scary-for-words house loans that imploded. Those loans were the toy of Wall St and mortgage brokers - who were NOT regulated by the CRA. In fact the community banks were squeezed out of the residential mortgage market for the past 10 years

FACT: The community banks that are failing (about 3 or so a week) are going under because of their COMMERICAL loans - developers, shopping centers, businesses etc. And that doesn't have squat to do with the CRA.

How to identify a Republican right-wing fruitcake - someone who never lets the facts interfer with their political agenda.


(2) Increase downpayments? Pray tell how the median income household with its $54000 a year is supposed to save up $54000+ for a 25% downpayment so the mortgage only equals 3 times their income? Or even $40000 for a house that is only 3 times their income? Basic modest living expenses might -if they are lucky - leave them only $6000 a year for emergencies, vehicle repairs, retirement savings and house savings. Say they save 1/2 for a house. It would take them 13 -18 years to save the downpayment for the median priced house in the US. (Assuming n job losses, income cuts, huge medical bills, illness, divorce.....)

(3) Eliminate Fannie/Freddie and you go back to 1925 or so. There were NO 30 YEAR MORTGAGES without gov't support.

Before Fannie, here is how it worked:

(a) 50% down

(b) mortgage only for 3 -5 years (although amortized over 15 years)

(c) at the end of the 3-5 years, the borrower had to get a new loan.

This was NOT a reset of interest rates but a brand new loan at the now-interest rate.

So you buy a house and borrow $100000 AT 5% for 5 years. At the end of the 5 eyars, you have to get a new loan - and now interest rates are the 25 year historical mean of 7.5%, a 50% increase in the interest.

Good luck affording the house after the loan at the lower rate ends.

And down and down and down go house prices in order to compensate for the huge risk the buyer is taking on that the interest rates can go up.

(And yes we have a tiny bank here that holds its own loans, never sells them off and it ONLY does 3 year mortgages. Interest rate changes are the borrower's problem.)

And that is how it works in most other countries.

Posted by: eabpmn | February 11, 2011 2:39 PM | Report abuse

Generally 10% down is a good idea, but with the glut of housing available and the need for low/middle (less than 100K annual income) income housing in this country a cookie cutter approach to the problem ain't going to cut it as public policy. If a government borrower is looking to finace a home they plan to reside in for the next say five years and have adequate proof of income and good credit in relationship to their housing expenses (rent, utilities etc.) than a waiver of the 10% requirement should be available.

Posted by: Anonymous | February 11, 2011 2:51 PM | Report abuse

Um, if they phase out the deduction over say 15 years won't that be less disruptive? Yes, yes it would be less disruptive. I see no issue with the 10% downpayment. If people don't want to do that, I am sure lots of silly people will lend to them and get another collapse working right quick.

Posted by: baldinho | February 11, 2011 3:18 PM | Report abuse

There is no easy answer to this. Higher down payments require more commitment from borrowers which is a good thing. But they also create less demand which puts downward pressure on prices.

Foreclosures will continue to come to the market for the time being and we have to think about properties that baby boomers are going to leave behind as they pass on. I wonder how much a mandated 10% down payment would serve as a barrier to keeping people moving through the market at current prices. Would prices have to decrease substantially? Or are we already at a level of stability in the market where that could be implemented with little disruption? I don’t know the answer to these questions, but they are the types of things we need to think about if we were to consider this.

The mortgage interest deduction has been raised by a few folks here. But that topic shouldn’t even be addressed unless in the context of reforming the overall tax code. Getting rid of the interest deduction without doing anything else to tax code would decrease the consumer spending potential of so many American households. The deduction might not seem fair for renters, but you have to consider the effects on the economy that it has.

Posted by: bcp76 | February 11, 2011 3:33 PM | Report abuse

The median home price in NoVa is about $550K ( I think for most people coming up with 10% of $550K or $55K would be very difficult.

I think a better solution than requiring a hefty down payment is for mortgage lenders to very thoroughly scrutinize potential borrowers to determine if they truly can afford a house they're considering buying.

This wasn't the case before the financial sector collapse of 2008. Mortgage lenders loaned money to borrowers knowing full well they couldn't pay the loan back. Prior to 2008, mortgages were resold and securitized so many times (generating nice fees for all the middlemen along the way incidently)no one really cared if the borrower couldn't repay the mortgage.

Posted by: montana123 | February 11, 2011 3:36 PM | Report abuse

Posted by: eabpmn-

(1) And there the right-wing goes again spouting their fantasies and lies with this:

"The reason for the home implosion? The Community Reinvestment Act, brought to you by Jimmy Carter and put on steroids by Bill Clinton, compounded with Alan Greenspan's irrational exuberance of raising the Fed Funds Rate, every quarter, with the support of "Dickie" Fisher.

Posted by: Computer_Forensics_Expert_Computer

How to identify a Republican right-wing fruitcake - someone who never lets the facts interfer with their political agenda.
Gee, I'm just a homeowner. what's your excuse?

I wonder who signed up for the 1/1, 3/1, 5/1 Adjustable Rate Mortgages? Was it Wall Street? Nope.

My political agenda is simple- If you can't afford it, you don't buy it. Easy money caused this. How do you get "easy money?" Shakedown banks for loans that are unpayable, otherwise face a lawsuit, which is much more expensive.

Talk to your Community Organizer in the white House about it.

Also, when oil was at $140 a bbl, the Federal Reserve raised the Fed Funds Rate, in which ARM's are tied to. people had to make a choice- Gas for the car or a roof over their heads.

Anybody with a HELOC could tell you what was going on. Survival of the fittest. Get used to it.

Posted by: Anonymous | February 11, 2011 3:49 PM | Report abuse

Back when I bought my first house in 1985, 20% down was mandatory from the mortgage companies and banks we investigated. It was tough, and we had to get a smaller, less expensive house, but we ended up in better financial shape in the long run because we could afford the mortgage AND the upkeep, tax increases, etc. Not everyone should own a home. I don't think most people these days have the financial discipline and/or the financial means to keep up with the real estate tax increases (school, municipal, county), and maintenance (repair/replace things like roof, heat/ac, plumbing, electrics, appliances, yard, etc.). Upkeep is expensive even with DIY skills; if you have to hire pros, it's budget-busting.

Posted by: Anonymous | February 11, 2011 3:51 PM | Report abuse

"wonder who signed up for the 1/1, 3/1, 5/1 Adjustable Rate Mortgages?"

Better yet ask who approved these mortgages?

Survival of the fittest, huh? Typical Republican attitude - take from society but don't give anything back.

There is no such thing as a "rugged individualist" or a so called "self reliant person" living in a modern society. Everyone here (even Fox News viewers) is able to survive because of the charity and good grace of others. Do you hunt for or grow your own food? Did you build your own house? Are you able to cure yourself if you get sick? Did you build the highway you drove to work on? Who inspects the food you buy in the grocery store? Who flies the airplane and controls the airspace so you safely arrive at your destination?

Survival of the fittest.

Yea, right.

You survive because of others.

Posted by: montana123 | February 11, 2011 4:03 PM | Report abuse

10% down kills the American Dream. Will never happen.

Posted by: jimward21 | February 11, 2011 5:06 PM | Report abuse

Has Obama become a Republican? EXACTLY how does this help the middle and working class? Does he want to condemn all but very few of Gen X and the Millenials to permanent renter status? Seriously. At a median family income of $50,000, with rising health care, energy, education, rental, and food costs -- and stagnating middle class wages -- how long might it take for even a frugal family to afford a $20,000 down payment? Seriously, who does this help?

Posted by: pscohl | February 11, 2011 5:58 PM | Report abuse

No one should buy a house without at least 20% down. If you can't afford to make a 20% down payment, you can't afford the house. This lack of ability to save for something and buying above your means are part of what got us into this mess. It doesn't affect just the irresponsible who stop making the exorbitant payments they committed themselves to, my home value went down too!

Posted by: Anonymous | February 11, 2011 7:17 PM | Report abuse

Keep housing affordable and keep regulations in place that prevent predatory lending practices.

Keep an agency that will assist first-time home buyers with what to look out for and what to be aware of in purchasing a home. Without an agency that is there to assist first-time home buyers, our citizens can fall prey to unsound loan agreements and structurally unsound housing.

Don't just throw people like Bernie Madoff in jail because he ripped off rich people; throw the people in jail who ripped off the working class people who just wanted affordable housing and a home to call their own.

And throw the Republicans in office out on a rail - if it weren't for venal hacks like John Boehner we would never have had a problem with Bernie Madoff, James Halstead, Robert Harvey, the Lehman Brothers, Lou Perlman, or predatory lending practices, etc.

Send a clear message in 2012 and get rid of the John Birch Society Lunatics, Venal Hypocrites, and Teabagging Morons - in other words, vote the Republicans out of office.

Then regulations will be put in place to keep homebuyers protected, retirees won't lose their pensions, people on Social Security won't get cut off, and we won't see 500,000 jobs bled like we did in December 2008.

And then it won't be a problem for a first-time home-buyer to put down three percent on a house.

Posted by: jakrdy | February 11, 2011 7:23 PM | Report abuse

Should the United States become a Banana Republic where only the rich can afford to own a home?


Posted by: jakrdy | February 11, 2011 7:27 PM | Report abuse

Someone commented that a higher percentage down payment is necessary in order to prevent a buyer from turning over real estate at a higher price - claiming, "...Then there won't be so many properties being "flipped" - driving up the prices.

This person must be flipping out of his/her mind to think that simplistic solution would serve to prevent this.

Did it ever occur to you that without regulations the price can be flipped to an even higher rate to correspond with the high down payment?

In case you didn't notice, and obviously a lot of you Republicans turned a blind eye to this - what caused the economic downturn was deregulation and the banks consolidating with investment firms and mortgage brokers without being required to have the equity to cover their incredibly inadequate crapshoots.

Among the very rich, a sense of entitlement has taken hold, where they have become belligerent to the poor and the working class. YOu see them claiming that they should have more influence because they ARE rich and made bigger campaign contributions to people like John Boehner. John Boehner feels their "pain" -that's why he and the Republicans just strongarmed Obama into agreeing to lose 40 BILLION in lost tax income so that the rich could get even more loopholes and cuts.

And it has nothing to do with the trickle-down theory anymore, we know that didn't work when we saw the last four months of 2008 bleed jobs each month at a rate of 500,000 plus per month which was the result of the last ten years of tax cuts for billionaires. They can't even pretend that it's going to help working families - granted, the Republicans half-heartedly pushed the line that raising taxes at the top would hurt small businesses, but they could barely keep a straight face with that lie.

Instead, we are hearing that people who make a mere $500,000 each year aren't really rich enough. I mean, look at the expenses they have to pay on their huge houses - one for winter and one for summer, and sending their kids to elite private schools, their ski trips and summer vacations, their numerous cars, and the additions they are building on their houses. Why, they can barely make ends meet on that much! Why should they pay their fair share in taxes, just make the postal workers' hours longer and their freeze their pay increases - those despicable federal employees don't deserve a raise or retirement benefits, and taxes are so evil and dirty.

But the pain of families who have lost their only home, or their jobs, or their hopes --

They need to make the sacrifices.

And they need to pay still more.

2012 can't get here soon enough.

Posted by: jakrdy | February 11, 2011 7:54 PM | Report abuse

Wait a minute - this is an insipid poll. 5 percent was what Obama has proposed, above 3 percent for FHA loans.

Which is fine.

This poll is very misleading.

It's bullsh-t.

Posted by: jakrdy | February 11, 2011 8:18 PM | Report abuse

As we saw during the recent housing bubble, housing becomes unaffordable when you allow very low down payments. People with little skin in the game can bid up prices. Thus, requiring a larger downpayment will put downward pressure on housing prices, which then become more affordable.

Also, eliminate the mortgage interest deduction on second homes and phase it out for borrowers above a certain income level.

If you can't save 10% for a down payment, you're probably not ready to buy a home. When was the last time this government installed a policy that rewarded and encouraged savings rather than punishing it?

Posted by: Anonymous | February 11, 2011 9:02 PM | Report abuse

Instead of requiring a downpayment of 10% that will be tied to the value of the property, why not require people to pay x months of mortgage up front. Property values remain in flex and can and may go down - If you have a new escrow system where money is set aside for atleast 6 to 12 months of mortgage payments, chances of default can be substantially reduced.

We need some new approaches to prevent a future housing catastrophe, why not consider this approach.

Posted by: spidy99 | February 11, 2011 9:39 PM | Report abuse

look right now I cannot get a loan on commercial properties without 70%LTV so why not put down 30% for residential as well. For the average middle class family in NOVA that putting 150k to 200k down should not be a problem for a house in the 550 - 600k range. If it is you have bigger issues.

Posted by: dctax4u | February 11, 2011 9:56 PM | Report abuse

Ten percent in Cincinnati is not the same as 10 percent in DC even though the cost of living, minus housing, is the same. An across the board requirement would kill the hosuing industry. Let the banksters make the determination themselves.

Posted by: Anonymous | February 11, 2011 9:58 PM | Report abuse

The donk who recommends a 20% down payment is clueless. That would effectively squeeze the middle class out of the current market and cause a drastic drop in home prices for everyone.

Bad underwriting and certain aspects of the mortgage securitization market were the biggest cause of this mess. Also, Fannie and Freddie should have never been publicly traded companies given their implicit backing by the federal government. Those are the problems that need to be dealt with.

There are plenty of good borrowers that can't put down 10% or 20%. You don't want to shut those types of borrowers out of the market. For those of you getting on you high horses about higher down payments, you have no idea how much of a negative impact that would have on all of us. You have absolutely no clue.

Posted by: Anonymous | February 11, 2011 9:59 PM | Report abuse

Rule of thumb was 20% down. When did that disappear?

Where is the Grand Jury and the FBI? Where is that investigation of fraudulent loans and such.

The country needs justice by way of an FBI and Grand Jury investigation.

Posted by: rheckler2002 | February 11, 2011 10:12 PM | Report abuse

This is a loaded question pandering to the idea that we are in this mortgage mess because of a bunch of deadbeat no-good people that simply don't know how to manage their personal budgets. The fact is that Housing costs ballooned out of control due to speculation and crooked banking strategies. Rental costs also ballooned out of proportion to salaries. There is bound to be collateral damage in a situation like this. Having 10% down or not wasn't really the problem! Inflated housing prices were. They still have not yet dropped to sustainable, realistic levels in most areas.

Posted by: Anonymous | February 11, 2011 10:54 PM | Report abuse

FHA loans! What a ponci scheme joke, especially in 2003-2007.
I sat on my Washington DC condo board. you would not believe the people buying condo units with 0-5% down on 3 year interest-only loans from good ol' FHA.
For those of you clueless about FHA, if you're not a veteran or active military, you can qualify on a pittance of salary. Pittance!

It was clear from Day 1 that the taxpayers would bailing out these unrealistic people. Total joke of a program the last 10 years. Pathetically, the joke's on the hard-working prudent tax-payers now....

Posted by: SamRon1 | February 12, 2011 12:21 AM | Report abuse

As a recent first-time homebuyer in Arlington with a steady income, I was very thankful for the 3% down requirement for FHA loans. Having to save an extra $40,000-50,000 to meet a 20% threshold would have required me to delay my home purchase for an extra 4-5 years. During that time, I would have been paying rent very similar to my current mortgage payment at the risk of home prices beginning to bounce back or interest rates rising. The fact that I recently graduated from college and don't happen to have $100,000 in a bank account has no bearing on my ability to pay my mortgage; my credit history and debt/income ratio are likely more informative.

Moreover, as the owner of an ideal property for first-time homebuyers I fear that a 10%-20% downpayment requirement will reduce the pool of potential buyers for properties like mine and potentially reduce my property value.

If PMI and stricter credit checks are not doing enough to insure mortgage companies against defaults then perhaps more strict measures need to be taken. Removing the ability of young, first-time buyers with low net worth, moderate to high income, and excellent credit to buy their first home may not be the best option available for either the mortgage companies or their prospective customers.

Posted by: RJS | February 12, 2011 12:32 AM | Report abuse

People maintain and improve what they OWN, not what they rent. Moreover, communities of poor across America are suffering sub-standard rental housing. They have no incentive to improve someone else's property and the property owners treat the property as a business, not like their homes. As a business, maintenance is all about profit and with the poor, there isn't a great deal of profit. Restricting buyers to what they can pay on a monthly basis over time is the key; not how much they are able to put down. This proposal is outrageous! if anything, the housing boom demonstrated unequivocally the desire of all families to own their home so they have something to build upon. Don't discourage it. The foreclosure crisis wasn't caused by the poor; it was caused by Wall street, their greed and deception and their willingness to fudge the numbers to feed an obvious pyramid scheme!!!!

Posted by: Anonymous | February 12, 2011 2:13 AM | Report abuse

Anyone who doesn't have a 10% down payment probably shouldn't be buying a home.

Posted by: John991 | February 12, 2011 2:45 AM | Report abuse

10% down is the absolute minimum.

Posted by: Anonymous | February 12, 2011 4:39 AM | Report abuse

Back when I bought my first house in 1985, 20% down was mandatory from the mortgage companies and banks we investigated.


Housing prices today, in relation to salaries are much higher than they were in 1985. I'll use Glover Park in DC as an example. As late as 1993, a single family rowhouse in Glover Park sold for 110-120,000. Today, it could be $650,000. Salaries in the region have not gone up 600%.

Part of the run up is because zero down loans basically enabled people to buy much more house than they had the down payments for. Eliminating those loans and doing away with the mortgage interest deduction would probably cause prices to fall to closer to their real value -- a good thing for buyers and a reality check for owners.

Finally, it's important to note that people in DC are paying a lot of rent, too -- so the notion that if you can't afford the down payment, you can't afford the house is not true in all cases. I know people whose monthly rent is pretty much the same as a monthly mortgage payment for a comparable place.

Posted by: Anonymous | February 12, 2011 6:09 AM | Report abuse

Honestly, I don't have a problem with a 10% down payment. That, and the mortgage interest deduction, are only keeping housing prices inflated past the point where most families can afford to buy.

Posted by: Anonymous | February 12, 2011 6:41 AM | Report abuse

My bank will not lend the full value. People who cannot afford a down payment, probably cannot afford to make the monthly payments. The recent problems were caused by lenders giving loans to many people who should not have received loans. There were red flags that were ignored. When I was a child, a working man may have bought a starter house for double his annual wages, and that was when interest rates were low. In recent years people were buying homes for ridiculous multiples of their annual wages, often with high interest rates. People were dreaming too big.

Posted by: FredinVicksburg | February 12, 2011 6:48 AM | Report abuse

I dont think that the government should be in the business of mortgages other than to set the laws to which mortgage companies must abide by to ensure people wont be pillaged by some of the more sleezier mortgage folks out there. That being said, depending where you live, 10% can take years to save. I lived in Destin FL for a spell. The price of homes, condos, townhouses are astronimical compared to what businesses are paying the local labor force per hour so places like this have a huge disparity making the likelihood of owning a residence almost impossible unless you take up communal living. New home buys (usually freshly hired college grads)would have to rely on parents to make a part of the 10% requirement. In the DC metro area, a starter home..could range between $250K-$350K. The farther out you go the you got to have a car to afford a cheaper house/condo/townhouse. It would take these kids until they are 40 to afford a starter unless the parents kick in half and thats if the parents are well off enough to have an extra $15K in their bank. Most average Americans do not-especailly now with a recession. So, it will always come down to the more elite and priviledged. I think 5% is more realistic for average Americans. The scrutiny must lie in assessing the persons credit, longevity in a job and the risk factor of whom someone works for.

Posted by: Anonymous | February 12, 2011 7:39 AM | Report abuse

Let's peer into the crystal ball at the future for a moment. The Nov elections were about getting rid of socialism. Now, what if Medicare and Social Security are abolished as conservatives, especially Tea Party types, are calling for? That means 20% of our income goes to a Medicare 401-k + another 20% goes to a retirement 401-k (totaling 40% of our gross income). That's a lot of dough. So on top of that we are supposed to save up for a 20-30% down payment on our house + mortgage payments? Who but the most wealthy could actually afford to do this? We are talking about nearly 100% of our total annual income going to retirement (+meds) and housing alone. Thus, home ownership in the future will become completely unaffordable except for the rich.

I get uneasy whenever a rich conservative lawmaker tells me I need more "personable responsibility." Easy for them to say all right. They don't live in my middle-class world.

Posted by: Anonymous | February 12, 2011 9:16 AM | Report abuse

I think, as always, there has to be a balanced approach to making sure that the Middle Class has the opportunity to be homeowners while not over-extending themselves with a purchase they cannot afford. Currently, you can't buy a fixed 30-year without putting 20% down, so 10% seems almost lenient.

Posted by: Anonymous | February 12, 2011 9:52 AM | Report abuse

Home ownership is greatly exaggerated. The great ownership society was a major hood wink on the US middle class....who's been in decline for close to 30 years now.

The middle class has been struggling since Reagan to maintain their living standard...1st it was 2 working spouses, then it was relying on their homes as a source of cash, then it was running up credit card and other debt. The magical leverage and debt trap has trapped the middle class into today's harsh reality....they exported all of our jobs and now we have a collapsing economy. There are no ways to compensate for the exploitation at the hands of Corporations and the rich. Our nation and especially our US Corporations better start creating jobs in the US....or we will end up like Egypt.

Posted by: Anonymous | February 12, 2011 10:14 AM | Report abuse

If you can't manage to acquire 10% of the price how will you manage to pay your future house payment?

Asking for some money down is a good way to window out those who don't have the financial skills to manage mortage debt.

It also should act as a damper on out of control housing prices.

Posted by: Anonymous | February 12, 2011 10:22 AM | Report abuse

For many years, Veterans Administration and Federal Housing Administration loans on modest houses required only a 5% down payment. There was no meltdown during the years when this was in force, because the standards to qualify for the loan were realistic.

The loans were fixed-rate thirty-year loans and the interest rates were lower than they might have been because the loans were insured by the VA or FHA. No one ever borrowed on the value of their house's appreciation because houses didn't appreciate much then.

What caused the recent meltdown was the plan, urged upon the unwary, to borrow against future appreciation in order to pay future mortgage payments. When houses stopped appreciating, the whole house of cards collapsed.

The answer is not to raise the percentage of the required down payment, but instead to require that a borrower have a stable income which will enable that borrower to meet a level stream of payments necessary to service the mortgage. Why look for a different fix when we know that this strategy worked well for decades?

When my husband and I tried to buy a house in the 1960s, the banks refused to count my income as a teacher into the calculation of whether we could afford the mortgage. They said I would become pregnant and stop working, so they would give us a loan only if I agreed to a sterilization operation. Boy, have times changed! Back then, it was assumed that young mothers would not work outside the home, even if they said they intended to do so.

Somewhere along the way, those banks changed their standards and granted NINJA loans: no income, no job, no assets. That is what caused the meltdown -- not the low down payment required.

Posted by: jrsposter | February 12, 2011 10:28 AM | Report abuse

In a vacuum of other options, sure, why not require 10%? Taking a broader view no, I don't support a 10% requirement. What I do support is a lender being left to decide for themselves if they deem, based upon the totality of factors, that someone represents a worthwhile risk to make a loan to, but only in conjunction with a regulatory requirement that if they take the risk they own that risk - no selling, no transferring, and they must maintain sufficient cash reserves to cover at least 30% of real-estate loans that were not obtained with sufficient up-front cash.

Posted by: Anonymous | February 12, 2011 10:33 AM | Report abuse

home buyers should be putting 20 percent down--as it's the appropriate part of their income but federal govt should not be in the loan business and think that everyone should be a home buyer.

And folks if you haven't learned by now--you buy a house to live in it not to speculate on it.

Posted by: mil1 | February 12, 2011 11:36 AM | Report abuse

The median home price in NoVa is about $550K ( I think for most people coming up with 10% of $550K or $55K would be very difficult.

Baloney. If you're buying a $550k house, your monthly payment is going to be close to $4k a month factoring principle, interest, taxes and insurance. Basically, would be buyers just need to save 14 months worth of house payments...which is a pretty good test of whether you have the financial savvy to handle a house.

Posted by: wolfcastle | February 12, 2011 11:50 AM | Report abuse

"...monthly payment is going to be close to $4k a month ...would be buyers just need to save 14 months worth of house payments..."

No way, homeboy. Basically you're saying someone should be able to handle paying a mortgage on top their monthly rent as well as all their living expenses, bills, etc.

I don't think so.

I guess someone could save $4K a month for a down payment if you live in your car, stay in a homeless shelter, or mooch off of a family member or friend rent free.

Posted by: Anonymous | February 12, 2011 2:42 PM | Report abuse

"...And folks if you haven't learned by now--you buy a house to live in it not to speculate on it."

Tell that to the freaking house flippers who contributed to the real estate bubble.

Mortgage lenders should refuse to lend to house flippers, period. Now if a house flipper want to speculate with their OWN MONEY I have no problem with that. Just not with borrowed money.

Posted by: Anonymous | February 12, 2011 2:46 PM | Report abuse

On top of piling on a huge debt to our children, now we're going to make it harder for them to buy their own home. The financial industry created the problem, now we're proposing steps to further protect the same bankers that bankrupted the country--on top of bailing them out. This is the first step towards eliminating 30-year mortgages--a benefit every generation since the great depression has enjoyed. How's that fair to tomorrow's would-be home buyers?

Posted by: Testa1 | February 12, 2011 3:18 PM | Report abuse

still waiying for my free mortgage O

Posted by: Anonymous | February 13, 2011 12:41 AM | Report abuse

Heck, when we bought our first house it was standard procedure to put down 20%. 10% is not unrealistic and people will be less likely to walk away from a home if they have their own hard earned money in it. You need "a little skin in the game" The zero down mortgages only exacerbated the housing crisis. Why not walk away, no financial loss to you.

Posted by: Anonymous | February 13, 2011 8:11 AM | Report abuse

Zero and low down payments have been successful in all areas of our commerce, including housing, for decades. Requiring factual information to be contained within documents will ensure that loans get repaid by percentage enough to be successful.

Posted by: Anonymous | February 13, 2011 8:58 AM | Report abuse

Anyone who can't afford to purchase their home ALL CASH, needs to sleep on the street, or in their car...

They LOVE making Your money...THEIR MONEY!
Just like our friend Mr. Obama.

Posted by: Anonymous | February 13, 2011 4:16 PM | Report abuse

Obama's plan is terrible. Just like every other policy he has put forth.

So let's see if understand his latest proposal, make it harder for people to own home, resulting in increased tax payments by not having itemized deductions, which Obama has said earlier homeowners shouldn't be allowed to claim. So in the end, Obama's plan is to force people into rental properities (rewarding the rich who can own buildings or homes), increasing everyone's taxes. Oh and guess what will happen to rents once everyone is forced into rentals, they will go up! Probably as high as mortgages for similar or smaller homes. But since no one will have any financial benefit of owning a home, why bother. Why bother investing in your neighborhood, you dont own it.

It is a stupid plan that makes no sense except to someone who has a serious contempt for hardworking american's that take pride in homeownership.

Posted by: sanmateo1850 | February 14, 2011 12:16 AM | Report abuse

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