Mortgage interest deduction.....

[quackhead11]

I have also heard mention, that the banks and financing companies are trying to push towards a mandatory 20% down-payment requirement to guard against risk more.

[Smoke68]

Really trying hard to figure out why that's a bad idea....... you being sarcastic or somethin? I don't see a problem with a bank being willing to make a 0% down loan on its own accord, but that bank won't last long. I don't see a problem with a person taking out a 0% loan, but I don't want to have to pay increased taxes to bail his butt out when he loses it.

You can't legislate common sense, but when you pass legislation that encourages banks to make loans to people that have no chance of paying it back, that's legislating stupidity.

I have also heard mention, that the banks and financing companies are trying to push towards a mandatory 20% down-payment requirement to guard against risk more.

[quackhead11]

Not trying to be sarcastic - I don't agree with it because it penalizes responsible middle-class people, who can afford to pay their 15-30 year notes, but are not necessarily able or are reluctant to shell out $40K plus as a down-payment, especially given the state of the economy and uncertainty surrounding the housing market. Not to mention, that most people trying to sell their homes now are taking such a hit, and then having to shell-out such a down payment on top of that? I understand the reasoning of passing risk along to the consumer and that owning a home is not for everyone, but couldn't they achieve the same results by determining the down-payment percentage based upon your credit and history instead of applying a blanket 20% requirement for everyone?

[rolo]

20% = skin in the game = less likely to hand in the keys + time = more stable housing market for everyone.

If you are reluctant to put down 20%, why shouldn't the bank be?

[Smoke68]

...who can afford to pay their 15-30 year notes...

From the bank's perspective, who is to say that just because you can afford it now that means you'll be able to afford it in a year? The 20% down is to protect the bank from a consumer who is either unable or unwilling to make payments and the value of the asset has decreased. Even with 20% down there is some risk, but it's managable.

For example: Joe has a job that pays $60,000/year and he buys a $200,000 house with $40,000 down (20%). In a year, the market has tanked and that $200,000 house is now worth $160,000. Joe is unable to make his payments due to job loss, but he is able to sell his house and he's basically out his $40,000 down-payment. The bank doesn't have a defaulted loan and Joe is able to get out of the deal without a foreclosure or a ding on his credit, albeit he did lose his $40,000 on a house that he chose to buy.

Same example: Joe has a job that pays $60,000/year and he buys a $200,000 house with $10,000 down (5%). In a year, market tanks, house is worth $160,000. Joe is now in the hole $30,000 on his mortgage. He is unable to sell the house, defaults on his loan, bank takes a loss and forecloses, Joe's credit is shot.

Quackhead I know you understood all this before I typed out an example, this is just for an illustration. And I get what you're saying about determining the necessary down payment based on credit history. Here's the thing: Mortgages are required to be insured when they're below 20% down-payment, so there is obviously risk that can't be managed no matter how good your credit is when the down-payment is below a certain point. Credit can't pay my mortgage when I lose my job.

Honestly, I'm against the government making it the law to require 20% down, but I agree that everyone should do it and it's what I did. And I think that every bank ought to require it for their own good. But, again, it's not the government's place to decide. If they would just keep their dag-gum noses out of it start-to-finish both people and banks would learn hard lessons quickly.

[quackhead11]

Smoke - I don't disagree with anything you said. My point is, such a blanket 20% seems to penalize certain middle class people who are resposible and save - such as a responsible person who would rather put down 10% or so, even though he has saved a ton more just to put up to weather any storms that could happen in the future, including if he lost his job - as opposed to having to sink most of his savings in a house in this type of market. I understand "risk" and that both the lender and buyer have to assume some.

It just troubles me that a few years ago certain lenders were running around making loans and assuming risk they never should have and most of them got bailed out and now more risk is being passed along to the buyer through this blanket requirement. I just think it unfairly penalizes a certain group of people. Why should the government have the right to tell a lender that you must get a 20% down-payment - isn't that a decision they should be able to make or have the option to charge a slightly higher rate if a consumer would rather put down less.

[riverat]

20% = skin in the game = less likely to hand in the keys + time = more stable housing market for everyone.

If you are reluctant to put down 20%, why shouldn't the bank be?

ding ding ding......

you go to 100% financing again then we go back to the crash in 09-10, and you loan 100% on home equity than you are opening up another Wachovia/appraiser scam that would send the market crashing once again.

if you can't afford a 40k down payment then instead of buying that 200k house, go buy a 100k and cough up the 20k.

[quack_a_tack]

Ah hell nevermind, I forgot everyone wipes their ass with hundred dollar bills. I for one would have not been able to come up with 40% on my house. I paid 20% in order to have a decent home in a community I felt comfortable raising my child. In memphis a $100k home gets you in the projects. The simple truth is the banks need to dig a lil deeper into past fonancial history before handin out money. Let the gates open.