20% Down... A Good Idea?

The 2008 financial crisis led a to a major economic downturn within our nation. As the "Housing Bubble" burst, soaring foreclosure rates emerged. This displaced many citizens and created hardships for countless American Families. Three years later, the housing market is still facing many challenges. Agencies such as, "the Federal Deposit Insurance Corp., the Treasury's Office of the Comptroller of the Currency, the Department of Housing and Urban Development, the Federal Reserve, the Securities and Exchange Commission and the Federal Housing Finance Agency," are searching for ways to prevent further foreclosures and stabilize the housing market. One tool that they propose is that "that home buyers make minimum 20% down payments." They claim that "it would lower foreclosure risk." However like many opponents, I question the effectiveness of this standard and wonder if it could have negative impacts on the housing market.

Opponents like "Sen. Johnny Isakson (R-Ga.) said, "If this rule goes into effect as proposed, it will be the last nail in the coffin for the already crippled U.S. housing market.... Poor underwriting led us into the housing crisis, not down payments." I agree with Jackson that poor underwriting had a major role in the crisis, yet I feel that the lack of regulation also played a major role. I believe that if a national standard for down payments is adopted, it can decrease the risk for future foreclosures. Although it will not eradicate the issue, it will be a major regulatory factor for the housing market.

This proposition won't take affect till 2013 and will face many political challenges from various institutions and interest groups. A declining approval rate and recessionary economy will challenge our President to make a decision. "Key segments of his political base...oppose any move to force working families to come up with more cash to buy a home. The six agencies' proposed rule could be an attractive target for the president's opponents next year." Ultimately the President faces a difficult decision that could impact his re-election as well as the housing market.