Sen. Johnny Isakson, R-Ga., strongly encouraged the Obama Administration to heed Federal Reserve Chairman Ben Bernanke’s warning that restrictive lending standards pose a threat to the nation’s housing recovery, National Mortgage Professional Magazine reported Nov. 20.
Sen. Isakson has repeatedly asked the administration to adjust its proposed rule that would prevent responsible homebuyers from receiving qualified residential mortgages by requiring a 20 percent down payment.
Bernanke said in a speech to the Operation HOPE Global Financial Dignity Summit in Atlanta that attempts to rectify previously lax mortgage lending standards have created a too-tight lending environment. “It seems likely at this point that the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery,” National Mortgage Professional Magazine reported.
“By putting into effect the 20 percent down payment requirement for Qualified Residential Mortgages, the administration is exacerbating the housing recession and preventing recovery,” Sen. Isakson said, National Mortgage Professional Magazine reported. “If the administration is serious about improving the economy, it cannot impose overly restrictive rules like the one that is on the table now and expect economic recovery.”
Isakson collaborated with Sens. Kay Hagan, D-N.C., and Mary Landreau D-La., to add a provision in the Dodd-Frank Act to ensure that well-qualified borrowers have access to affordable mortgages. Isakson’s provision said that QRMs should be exempt from a section in the law that requires originators to maintain a minimum 5 percent stake in the loan pools, known as risk retention, sold to investors.
However, financial regulators working to implement this provision have interpreted the Isakson-Hagan-Landreau QRM provision in a manner that the senators did not intend, National Mortgage Professional Magazine reported. The regulators have proposed that homebuyers be required to have a 20 percent down payment in order to be eligible for the exempted loans.
Lawmakers and some industry and consumer groups have asked regulators numerous times in the past two years to revise the proposed 20 percent down payment requirement, insisting that the regulators did not follow Congress’ legislative intent and clear recommendations to mandate a logical down payment.
Last year, Sens. Isakson, Hagan and Landreau led a bipartisan group of 39 senators in writing a letter that urged federal regulators not to restrict credit to middle class families working toward homeownership. More than 250 members of the U.S. House of Representatives authored a subsequent letter opposing the rule.