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Raising the Stakes to Reduce Whose Risk?

Some creditworthy borrowers may not be able to obtain mortgages, if Wells Fargo & Co. gets its way. The nation’s largest mortgage lender is asking U.S. regulators to set a down payment standard of 30 percent for loans that would be exempt from a risk-retention requirement. 

Banks would have to retain 5 percent of any loans with down payments of less than 30 percent if those loans are securitized.  

To put this in perspective, a 20 percent down payment on a $300,000 home is $60,000. At a level of 30 percent, a borrower would need to produce $90,000.

Banks could still make loans to borrowers with less than 30 percent down, but borrowers with lower down payments would ultimately receive higher interest rates for loans that would be perceived as more risky.

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Taking advantage… According to the 2010 NAR Profile of Home Buyers and Sellers, the typical recent home buyer made an 8 percent down payment. Talk to a Realtor® about how increasing down payment requirements would affect home buyers in your area. Talk to potential buyers about what percentage of down payment they plan to make, and how they will fund that down payment.