September 02, 2008

HousingPANIC Stupid Question of the Day


What is the minimum percent down payment that people should be required to have in order to get a mortgage (i.e. rent money from a bank i.e. the FHA or Fannie or Freddie)?

47 comments:

Anonymous said...

Zero percent.

But if/when they default, they go straight to debtor's prison.

To pay back society, they have to pick up the trash along side the highways, build government buildings, clean up and rebuild after hurricanes, etc. You know, all the jobs no one else will do.

Dummy said...

20% makes sense. Enough that a reasonable prudent person could afford it, and enough to have a stake in the house, while not being completely unattainable

Anonymous said...

This is a fools market. Let them lose.

Anonymous said...

This is a fools market. Let them lose.

Frank@Scottsdale-Sucks.com said...

20%.

Having said that, I agree with Kiyosaki that you should put at least 70% down on any house you plan to live in (i.e. non-income property). Any less and you pay so much interest you'd might as well rent.

Andrew from Russia said...

20% would be safe enough but 35% is even better. Given the magnitude of this superbubble, there's little to lose. Even better if there were no more GSEs supporting "affordability". The Russian GSE, AIZhK, appears to have given up on stopping the bubble madness and is now peddling an exotic mortgage scheme with growing monthly instalments based on "projected income growth". Wondering how long will that last. The November 5th shutdown date for HousingPANIC appears to be a bit early.

jim said...

None, provided the bank forfeits any future federal assistance, and provides full disclosure to investors/customers.

Noodles said...

15%

Anonymous said...

Keith,

A private mortgage contract between two parties should NOT be regulated by the government whatsoever!

Reguarding a mortgage contract which is in any mannor insured by public funds all of the following requirments should be enforced:

* 20% down derived from funds controlled by the mortgagor for not less than 30 continous days prior to the third day before closing. [Reason: To prevent fraud and guarantee that the mortgagor has skin in the game. Method to Enforce, Require a bank letter signed by a bank officer be delivered to the title company stating that the mortgagor has maintained a cumulative balance above the required stated amount in accounts soley under the control of the mortgagor for the time period required. And finally require that the letter be recorded as part of the mortgage with the county recorders office. Also, it should be a criminal offense for any bank officer to sign such letter which contains materialy false information and such bank should be liable to the state for triple damages, to the mortgagee for all actual and consequential damages, together with attorney fees.

* Proof of income, via tax returns or other offical documents, together with a sworn statement of accuracy by both the originating lendor and the mortgagor. [Note: The originating lendor's certificate of accuracy, shall include a due dilligence report by same describing what steps and methods were used to verifiy the mortgagors financial statments. Also the IRS should be required to establish an automated method that would permit registered mortgage originators to verify the accuracy of any tax documents and issue a accuracy tracking number which can be recorded on the due dilligence report.]

And finally, make the originating loan officer personally liable for any and all fraud upon his due dilligence report, together with fines starting at $1,000,000 per count of fraud against any employer of such fradulent loan officer; with a statute of limitations equal to the length of the mortgage term.

THIS WILL STOP FRAUD IN ITS TRACKS!!!

So, in a nutshell....

20% DOWN & Public insured mortgages written within proper guidelines using accurate and documented financial statements.

Anonymous said...

100%. Usury should be considered robbery. If we don't, banks will forever rob us into poverty, whatever the amount of wealth we produce.

Getting Worried said...

I'll put down 100% because right now it seems as if I'd rather own the roof over my head rather than have money in our insolvent banking system.

Anonymous said...

On Saturday I saw an Obama speech. In that speech he talked about HELOCS. And he said that people had to get HELOCS in order to pay the bills. So that is the new demoRAT story eh Keith? All the FBs out there are in trouble because they had to buy $600K houses on $40K incomes to pay the bills. No mention of the BMW or Hummer or tit job purchased with that HELOC. Although I guess technically those are bills too.

Anonymous said...

People should put down at least 20% down payment.

Kevin said...

Since we're still in a deflating bubble, 20%.

If we were in a more normal market (i.e.: slow gains in value over long periods), then I think 10% would do.

No anti deficiency said...

I think 5-10% is ok.It should be changed to allow banks to go after homeowners for losses though.If people knew they would have to pay back losses we wouldn't have this problem.The way it is set up now encourages specualtion because it is the houses money.Not sure why it is this way.Anyone have the history?

BB said...

.

20% down MINIMUM, with real documented INCOME verification.

This would be painful in the short term -but healthy in the long term for all buyers as PRICES would have to fall in line with INCOMES.

It's the PRICE -to- INCOME relationship that's gotten out of whack via "creative lending".

.

Anonymous said...

any time someone mentions "usury", I start counting down until someone mentions the protocols of the elders of zion. Usually doesn't take long.

Anonymous said...

Whatever percentage the two parties of the contract agreed on, but they have to take responsibility for what they signed.

The problem with the current system is not with the content of the contracts, but how the contracts are enforced.

Anonymous said...

[quote]All the FBs out there are in trouble because they had to buy $600K houses on $40K incomes to pay the bills. No mention of the BMW or Hummer or tit job purchased with that HELOC.[/quote]

C'mon. Y'all *know* the BMW/Hummer/fake tit on HELOC crowd are Republicans.

Devestment said...

20%

Peter T said...

10% downpayment should be the minimum. It gives the borrower enough skin in the game to not play around and to understand the real price of the house.

The interest rate of the remaining loan should depend on its size: highest for 90% LTV, lowest for 50%or below.

Lady Di said...

20% - time to get back to the fundamentals

special treatment said...

20%

But if you're on Mozilo's VIP list... a zero down 4% ARM NINJA!

Markus Arelius said...

30% because:

a.) it will motivate Americans to save money for this purchase.

b.) it forces buyers to put some skin in the game and not "walk away" from loans, which crushes financial institutions and govt.

c.) banks have some additional collateral to cover risks

d.) forcing more money up front means no need for "pie in the sky" creative mortgage instruments, and will keep home prices more linked to true income and buyer affordability.

Anonymous said...

20%.

Did Kiyosaki's Rich Dad tell him to put 70% down? His poor dad, speaking from experience, could not have spoken from that perspective. The reality is most people need loans to buy a home.

Anonymous said...

Next month the Zero down FHA option goes bye-bye. This is a good thing because housing has come down but not enough yet. People can still get zero down loans and that keeps prices higher than they should be.

I put an offer an a house recently. Mine was 20% down. I got outbid by someone who was willing to pay more for the house but had no money to put down.

I hate bidding against people with NO money. They will always out bid you (pay too much) IF someone will give them the loan.

I'll be glad when they are removed from the market.

GT Charlie

Anonymous said...

25%

Anonymous said...

No money down Kieth! And if the thing doesn't go up in value 20 percent a year I walk!

Suzanne told me I could.

RayNLA

Anonymous said...

agree with Markus

One third of the purchase price 33%for anything (house, car, motorcycle, kitchen table, college tuition) bought on credit would take the air out of nearly any bubble that can be bought on credit - nip any bubbles in the bud so to speak and it would encourage a healthy activity - saving and thrift for a desired item or activity. You'll see that day come when purple unicorns with leprechauns on their backs come out of the sky to give us all a pint of Guiness for free.

Smug Bastard

Anonymous said...

.



20% minimum!

income verification!

legal status?


.

vanilla ice said...

If I were a smart banker at F&F considering housing prices will continue to spiral into a sink hole, I'd say 40%.

Ooops I forgot. As a person deciding the down payment on a loan at F&F, I'd want to get as many loans in as possible to generate cash flow, and get me a bigger bonus (whoo hoo!). And knowing that if this loan and many others defaulted someone would bail F&F out, and I probably wouldn't be working at there anyway, I'd say 2-5% max down payment. We wouldn't want to go much lower then that and excite regulators.

Anonymous said...

25-33%

Anonymous said...

20%

Markus Arelius said...

For the record I believe fervently in Leprechauns and purple unicorns and I expect you all to defend my right to such religion.

Anonymous said...

I think the market should decide what minimum down is but with one catch:

The loan originator must hold, in their portfolio, a certain percentage of randomly selected loans they originate.

Anonymous said...

any time someone mentions "usury", I start counting down until someone mentions the Church. Usually doesn't take long.

american consumer said...

it's all intertwined...
if 0% is allowed, prices go up so much b/c nobody needs to save anything for a house, there is way more demand from those fresh out of college with no savings and prices are pushed higher and ever higher.

if 20% is required, people need to save up for a good 4 years and this allows them time to settle and figure out where they want to live.

you cant argue that 'people need loans for houses'. dont you get it? if there were no loans, nobody could afford at today's prices and prices would fall to levels of the down payment...

so yes i'd argue 20-100% down required

wc said...

Absolutely the government needs to be involved in the contract between the mortgage lender and the borrower. It seems to be abundantly clear now that the free market does not regulate itself. In fact, the government should have gotten involved much sooner. It's so funny that republicans tout small government but actually spend more and have bigger gov't. than dems. As we, the taxpayers are now on the hook for this mess - no less than 20% down so they have skin in the game. Since we do pay taxes, we should have a government that works for us...the people...and not for corporations and self-interest/lobby groups. Sometimes, we really need a government that can step in. They just shouldn't step in to satisfy someone's personal agenda or to promote their own religious beliefs.

edd said...

To clear the inventory ....
10.02 % for the empty foreclosures.
20.03 % max for the rest.

hp fan said...

Down payments aren't the only problem.

The whole system of having 30 year mortgages is screwed up. Before government subsidized loans the term used to be 15 years.

I say get rid of all subsidized loans, personal interest tax deductions, and let the free market determine prices and down payments.

Reality said...

WC,

"It seems to be abundantly clear now that the free market does not regulate itself
. . .
we should have a government that works for us...the people...and not for corporations and self-interest/lobby groups."

Isn't the contradiction between these two sentences patentedly obvious? When you get the government involved, who do you think have the most vested interest and the money to sway the regulators on particular issues? The businesses that depend on the issue for its very survival or some disinterested party?

The failures that we are seeing are not free market failures. Those are the results of haphazard government regulations every step of the way as the government tries to correct its own mistakes in prior market regulations. If we removed the central bank backstop to the banks, they can lend to anyone they want at their own risk! It's the backstop, extracted from everyone single one of us at gun point (through taxation and forcible acceptance of the intrinsicly worthless pieces of green/peach paper) that enable the banks to lend with abandon like they did in pursuit of billion dollar bonuses!

FNM was a government creation, as a way to counteract the high market interest rate created by all the non-productive/counter-productive waste of capital projects that the FDR administration was undertaking. Guess what, government cure is always worse than the disease . . . including diseases that were created by the government to begin with.

Bukko_in_Australia said...

Any time somebody mentions "usury" I start counting down, waiting for someone to mention the Koran's prohibition against loaning money at interest. But the count generally keeps going because there aren't many Muslims* reading American financial blogs.

*(I am not a Muslim. Not that there's anything wrong with that...)

Anonymous said...

100%

Now THAT would bring down prices.
You live in dive, save like a maniac, then pay 100% and move in.

Prices much lower and banking cartel cut completely out of the deal and NO BUBBLES.

GenericName said...

I'd say 10% on a 15-30 year fixed. It doesn't have to be perfect to avoid this kind of shitstorm. But lets see how bad this downturn is. RIght now it would seem that 15% would be the minimum to avoid bank losses. But this assumes you actually want the feds in the business of guaranteeing mortgages in the first place.

les said...

20% down. And get rid of all the government sponsored down payment assistant programs. And also, make it illegal for the seller to provide the down payment.

This neighborhood is lost said...

"100%

Now THAT would bring down prices.
You live in dive, save like a maniac, then pay 100% and move in.

Prices much lower and banking cartel cut completely out of the deal and NO BUBBLES."

Yep, and no growth either. That just goes to show the intelligence of the average HP'er. Unbelieveable. No wonder Keith is shutting it down, the intelligent HP'er left the building a long time ago....

Anonymous said...

it used to be 30 % required by bank in the early 1990's in my country; it goes down to 5/10% in 2000 and not it is going out to 20%. Bank requirement is moving first time byer out of the market.