Is the White House (and GOP) Confused on Housing?

Let me see if I can state this plainly: if housing does not recover in any meaningful way the U.S. economy is sunk. This is a platitude that every mortgage banker worth his/her salt knows. But there is one huge stumbling block to a housing recovery: loan standards and the qualified residential mortgage test, which – as presently written – demands a 20% downpayment from a consumer. If a 20% QRM becomes the standard it won’t mean that mortgage money will dry up, but it will mean that borrowers with low downpayments will pay higher note rates and lenders will rake them over the coals on underwriting – so much so that they will throw up their hands and say, “Screw it, I’ll keep renting.” In my book, all this talk of a “private market” blossoming and one day replacing Fannie Mae and Freddie Mac is a dream that will never happen, at least not any time soon. (The White House and GOP seem hell bent on winding down the GSEs without even entertaining the thought of some GSE-like entity to replace them.) Perhaps, a “more private” mortgage industry is a good thing and perhaps it’s achievable. But for that to happen housing values must stop falling and finally begin heading north again. A QRM with a 20% downpayment mandate will prevent housing from recovering. So, what’s it going to be: the chicken or the egg?