So, you're thinking about buying a home. You haven't won the lottery, so you're going to use a mortgage. I hope you've been saving your pennies - 5 million of them. If regulators in Washington have their way, that's what it's going to take to buy an average-priced home in Austin.
Last summer, Congress passed a sweeping overhaul of the financial system called the Dodd-Frank bill. That bill created a new class of mortgage loans called "qualified residential mortgages" (QRMs). This class is important because the bill makes it harder for mortgage lenders to securitize any loan that is not a QRM, and securitization is the grease that makes the mortgage market work and keeps interest rates low.
The problem is the bill left it to regulators to define a QRM, and as regulators seem apt to do, they have made a mess of things. The proposed definition for QRM is a 20% down payment with other limiting restrictions. In Austin, to buy a $263,700 average-priced home, that means you would need $52,740 for the down payment.
Senators inserted the QRM language into Dodd-Frank in an effort to encourage less risky lending. But as with a lot of government meddling, the unintended consequences may be horrendous. Many industry pundits expect the QRM to become the new "conforming" mortgage, the loan product offering the lowest interest rates. Non-QRM loans are likely to have interest rates as much as 2% higher.
The real estate industry and consumer groups are united against this proposed definition. The Community Mortgage Banking Project released a report in March that analyzed 33 million home loans written between 2002 and 2008. The results showed higher down payments had a very small impact on mortgage defaults. Doubling the down payment from 5% to 10% only reduced the default rate by 0.2% to 0.3%, and increasing the down payment requirement to 20% would eliminate between 27% and 40% of potential homebuyers from eligibility for a loan.
Consumer groups point out that middle-class and minority borrowers would feel the greatest impact from the proposed definition. A recent study showed it would take the average consumer more than a decade to save the required 20% down payment in most parts of the country. Homebuyers unable to afford the minimum down payment would be considered high risk even if they have an otherwise stellar credit history.
The senators responsible for QRM recently wrote regulators advising them that they intentionally did NOT include a down payment requirement in the definition and they never intended the definition to be so strict. More than 160 House lawmakers also wrote to regulators stating that the "overly burdensome dictate could threaten a full-fledged economic recovery."
Regulators have responded to all this pressure by extending the comment period for the definition to Aug 1st. It is not clear whether regulators are having second thoughts, but at least this gives lawmakers, consumer group, industry representatives, and YOU more time to encourage them to develop a more reasonable definition.
If you have a mortgage question, please leave a comment below, and I'll address it in an upcoming column.
A longtime Austin bookstore is turning the page. Half Price Books will close its store at 2929 S. Lamar Blvd. on March 15, choosing to relocate about a mile away to 2607 S. 1st St., in a neighborhood retail center just south of the South First and Oltorf intersection. The new location is expected to open in late spring.
On Saturday afternoon, a day after the move was first reported by the Austin American-Statesman on March 6, about two dozen customers roamed the aisles at the South Lamar store, flipping through paperbacks and vinyl records. Some shelves were partially empty, a children’s corner remained stocked for young readers, and a clearance shelf sat near the back. Around the store, stacks of boxed books labeled for transfer lined the floor as employees prepared inventory for the move.
Half Price Books' appeal has long been its mix of books and curiosities. Framed celebrity photos, first-edition books, and other pop-culture memorabilia sit on shelves near racks of vinyl records, DVDs, and other media. Because Half Price Books buys books from customers and also purchases unsold titles from publishers at a discount, the selection constantly changes.
The South Lamar shop has served readers in the Zilker and Barton Hills area for decades. The bookstore will operate a temporary location in the shopping center next door until the new location is ready, according to the Statesman.
Half Price Books announced it would be moving to South First Street.Photo by Kimberly Reeves
Half Price Books traces its Austin roots back to January 15, 1975, when the Dallas-based chain opened its first local store at 1514 Lavaca St., according to a contemporary report in the Austin American-Statesman. Like the company’s original Dallas store, the Austin location opened in a converted laundry building, reflecting the founders’ early strategy of using inexpensive storefronts to launch the used-book concept.
Initially, Half Price Books was intended to cater to college students. Another longtime Half Price Books location on Guadalupe Street north of the University of Texas, closed in 2004. The store reopened to a much larger space, a former grocery store, on North Lamar Boulevard.
The relocation comes amid continued retail change along South Lamar Boulevard. In the shopping center next door to Half Price Books, Michi Ramen has vacated to move to Oak Hill, and Baker Street Pub closed in 2025 after years in the center; Baker Street was replaced by Koko's Bavarian.