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Proposed regulation could stifle house sales

Now is a good time to move, but proposed regulation could mean higher down payments.

Now is a good time to move, but proposed regulation could mean higher down payments.

Proposed mortgage market regulations would increase the cost of buying residential real estate and make it more difficult for people to move into a new home, according to mortgage insurance provider Genworth Financial.

The 2010 Dodd-Frank Wall Street Reform and Protection Act included a provision requiring home loan lenders to retain some risk of financial loss when bundling mortgages into securities. Qualified residential mortgages, or those belonging to buyers considered low-risk, would be exempt from the risk retention rule. Because they would not cost lenders more to securitize, QRMs would have lower interest rates and fees associated with them than other loans.

Genworth joins many other individuals and institutions in arguing that regulators' proposals regarding QRM qualifications are too stringent. In particular, Genworth criticizes high down payment requirements of 10 to 20 percent. In a letter to the regulators tasked with defining QRM standards, Genworth said 80 percent of first-time homebuyers in 2010 would have been ineligible for QRMs based on a 20 percent down payment requirement.

Genworth proposed QRMs be defined by a 5 percent downpayment requirement and 45 percent debt-to-income ratio, noting that only 1.2 percent of loans originating between 2001 and 2008 that met these guidelines have defaulted.

Motivated perhaps by uncertainty about future mortgage market conditions, many people are relocating this summer. Real estate associations have reported increased sales in markets such as San Francisco, Tampa, Florida, and Des Moines, Iowa.