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.
Made in Austin 2026
Austin PBS to broadcast annual community celebration for the first time
Austin's community media landscape will be on full display on August 13 as Austin PBS hosts its first live broadcast of Made in Austin, an hourlong celebration of its local programming. This will be the fourth annual Made in Austin, which was previously just an event for supporters; now viewers can watch or listen to the event as it happens.
The celebration will feature talks and performances by journalists, filmmakers, and other community members who contribute to PBS programming in Central Texas. Viewers will also get a preview of what's coming in the next season, plus other upcoming educational initiatives and community partnerships, a press release says.
The schedule features:
- Conversations about journalism with the teams behind Austin InSight, Overheard with Evan Smith, and Decibel.
- Previews of a documentary about Carrascolendas, one of the country's first bilingual educational TV series and a product of Austin PBS; the "traumedy docuseries" How We Grieve; and a behind-the-scenes look at eclipse photography, Eclipse Outlaw Chase, among other titles.
- A bespoke spoken word performance, Dear Future Austin, by Austin hip-hop artist Qi Dada of Riders Against the Storm.
- An announcement about the second season of High School Quiz Show: Austin, plus stories about PBS Austin in the educational sphere.
- A celebration marking 30 seasons of Central Texas Gardener, including highlights from the season and some tips from host Jon Hart Asher to lead Austinites into fall.
- Learning about opportunities to support and engage with Austin PBS.
"Every day, Austin PBS invites viewers into the lives of remarkable people and communities across Central Texas," said Austin PBS president and CEO Luis Patiño. "With this year's Made in Austin, we're turning the cameras around and opening the doors to our home. This live broadcast is an opportunity to celebrate the community that makes our work possible while sharing a first look at the stories, programs and ideas that will shape what’s next for Austin PBS.”
Viewers can tune in via Austin PBS on TV, the PBS App, and the Austin PBS YouTube Channel on Thursday, August 13, starting at 7 pm.