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Big down payments could bar creditworthy borrowers from market, study finds

January 24, 2012

Requiring a minimum down payment of 20 percent, or even 10 percent, on home loans would push many creditworthy borrowers into higher-cost loans or out of the mortgage market entirely, a new study says. Possible down-payment requirements are part of a debate in Congress and among a cluster of federal regulatory agencies, as they develop new rules for mortgage lenders following the housing crash. To see what impact tougher rules for down payments and other criteria might have on borrowers, the University of North Carolina's Center for Community Capital, Wayne State University and the Center for Responsible Lending examined home purchase loans issued before the housing bubble burst. The researchers found that imposing a 10 percent down payment requirement would eliminate 38 percent of creditworthy borrowers from the traditional mortgage market and that at a 20 percent down payment threshold, 61 percent would be excluded.