A coalition of housing industry and advocacy organizations have written to the Federal Reserve Board of Governors, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency, strongly urging they not raise capital standards for bank-originated mortgages with down payments below 20%. The letter was signed by the National Housing Conference, the NAACP, the National Urban League, the Mortgage Bankers Association, and the National Association of REALTORS®.
“If these standards are adopted, they will have a devastating impact on our efforts to increase Black homeownership and disadvantage all first-time, and, in particular, first-generation homebuyers who do not have the benefit of multi-generational wealth or higher than average incomes,” the letter states. The FDIC itself noted in its own report on Down Payment and Closing Cost Assistance, “For many low- and moderate-income people, the most significant barrier to homeownership is the down payment and closing costs associated with getting a mortgage loan.”
Since the first quarter of 2020, the median home sales price has skyrocketed 32% from $329,000 to $436,800. A 20% downpayment on a median-priced home would require nearly $105,000 cash at closing ($87,360 down payment and $17,432 in estimated closing costs). The average downpayment for a first-time homebuyer is 6%, or $26,208 for a median-priced home, up from $19,740 in 2020. “It defies logic that regulators would encourage banks to triple the required downpayment for loans affordable to first-time homebuyers, locking out the very people they say they want to help,” said David M. Dworkin, President and CEO of the National Housing Conference.
The new standards also undercut the Community Reinvestment Act and the Fair Housing Act. “Encouraging banks to maintain branches in underserved communities under the Community Reinvestment Act while discouraging them from offering the very products most needed in those communities is both perplexing and ironic,” Dworkin said. “Under the Fair Housing Act, federal regulatory agencies are required to assess policy changes for their potential to discriminate against or exacerbate negative outcomes for protected classes under the Act. Rather than affirmatively further fair housing, this approach will negatively impact homeownership opportunities for all protected classes,” the letter states.
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