Ranieri Calls for Policies that Encourage Low Downpayment Lending

Tight credit is limiting economic growth and disenfranchising the vast majority of middle and lower income borrowers from becoming homeowners, according to Lewis Ranieri.

The founder of mortgage-backed securities urged regulators to insure lenders can make low downpayment loans under the qualified residential mortgage rule.

“I am talking about prudent low downpayment lending,” Ranieri said at a Bipartisan Policy Center forum on housing finance forum.

“We know what that looks like,” he stressed. And most of the practices that caused the mortgage meltdown are now illegal.

Requiring a 10% downpayment on a qualified residential mortgage will further restrict mortgage credit. Congress wanted a QRM loan to be a “good loan—not the best loan,” he said.

The chairman and founding partner of Ranieri Partners also called for reducing Fannie Mae, Freddie Mac and FHA loan limits to make more room for private lending.

And he urged the Justice Department, HUD and state attorney generals to rethink their strategy of suing lenders for past sins.

“They are going to have to decide when they have gotten enough retribution and want an effective and functioning mortgage finance system,” he said. Until then, lenders will continue to constrain credit and make only the safest loans.