Down payment standards should be relaxed to just 10% to spur homebuying among millennials, Bank of America CEO Brian Moynihan said during a television interview this week.
"It takes just a little more time to accumulate 20% than it would for 3% or none, which is what the rules were for a short period of time," Moynihan told CNBC. "So our goal, going back to regulatory reform, is should you move the down payment requirement from 20% to 10? Wouldn't introduce that much risk but would actually help a lot of mortgages get done."
Based on the statistics, there is not much of a difference in the performance of an 80% loan-to-value ratio mortgage and one with a 90% LTV. But the real decline in performance is the 90% to 95% LTV band, Moynihan added.
"We don't want to wish people to borrow and then they have trouble repaying," he said.
The biggest misconception among homebuyers is that they need to have 20% down to purchase a home, a recent Genworth Mortgage Insurance survey of mortgage industry executives found.
Private mortgage insurance is typically required by the secondary market for loans with LTVs over 80%. The Federal Housing Administration offers a 97%-LTV product and Veterans Affairs is willing to guarantee loans with zero down.