Mortgage Rule Raises Doubts For Banks, Borrowers Regulators took a big step Tuesday in reshaping the nation's mortgage market. The Federal Deposit Insurance Corp. introduced a new rule that could end up forcing borrowers to make larger down payments.
NPR logo

Mortgage Rule Raises Doubts For Banks, Borrowers

  • Download
  • <iframe src="https://www.npr.org/player/embed/134960865/134961370" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
Mortgage Rule Raises Doubts For Banks, Borrowers

Mortgage Rule Raises Doubts For Banks, Borrowers

  • Download
  • <iframe src="https://www.npr.org/player/embed/134960865/134961370" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

MELISSA BLOCK, Host:

NPR's Tamara Keith reports this is the latest attempt to rein in the excesses that inflated the housing bubble.

TAMARA KEITH: This new rule from the FDIC and five other agencies aims to change that. It says, in short, if you're going to bundle loans into securities, you need to hang on to some of the risk. And the only way to avoid that is to work exclusively with super-safe loans, known as qualified residential mortgages.

SUZY GARDNER: The proposed QRM underwriting standards focus on borrowers' ability and capacity to repay by relying on verified and documented income.

KEITH: Here's FDIC chairman Sheila Bair.

SHEILA BAIR: I think it's important for people to understand the QRM rule is going to be a small slice of the market. It doesn't mean that everybody is going to have to comply with these standards to get a mortgage going forward.

KEITH: Steve O'Connor is with the Mortgage Bankers Association.

STEVE O: As it's currently proposed, it's very restrictive, and I think it will limit credit options for borrowers and make products more expensive for a lot of borrowers.

KEITH: This is all very discouraging for Sarah Schroeder. She's 29 years old and lives in Warren, Michigan, with her husband and two young children.

SARAH SCHROEDER: Our dream is to get into a home before our oldest child starts kindergarten so that we can live there for at least the next 18 years, till both of them finish school and decide to move on on their own. We want permanence. We want to be a part of a community.

KEITH: They've been saving for a down payment for years, but don't have nearly enough.

SCHROEDER: That 20 percent down payment is this almost mystical object that I'm just not sure that my family will be capable of saving.

KEITH: And John Taylor, president of the National Community Reinvestment Coalition, is convinced that if the rule goes ahead as proposed, a whole lot of low- and middle-income people won't be able to buy homes.

JOHN TAYLOR: Don't throw the baby out with the bathwater by eliminating qualified responsible would-be homeowners because they simply don't have the wealth accumulation to be able to plop down substantial amounts of money to get into homeownership.

KEITH: Tamara Keith, NPR News, Washington.

Copyright © 2011 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.