Yes, you read that correctly, the federal government is attempting to ease lending standards for the same housing industry that was the seed of the financial crisis. A proposed rule put forth jointly by the Federal Reserve Board, the FDIC, the Federal Housing Finance Agency, the Department of Housing and Urban Development, the Office of the Comptroller and Currency and the Securities and Exchange Commission all but eliminates any down payment requirement, aligning with what consumer advocacy groups have been calling for.
borrowers must provide income documentation that they can repay the loan, and that their debt-to-income ratio does not exceed 43 percent, among other requirements. It does not, however, have any rules requiring lenders to ask for a set down payment amount.
Up until now, the group of regulators had been pushing for a 20% down payment requirement, so the move to no requirement at all is quite a step in the opposite direction. After all, who can blame them? With new home sales plummeting, despite consistently higher prices, it is safe to assume the government’s best interest is to spur home sales and the overall economy. That being said, as we are all too well aware massive borrowing due to loose lending standards is precisely what sowed the seeds of the Great Recession in the first place.