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Banking Law Hung Up on Down Payment

Nolan Kienitz

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We got into this mess because someone sold the idea that we could separate risk from reward an a whole lot of people drank the Kool-Aid. Isn't it time for risk and reward to get back together again?


I'm not sure that raising down payment requirements are the answer, just need some pain to go back on the lender that issued the loan in the first place. Something to make sure that there is a pulse, paycheck, and a real house on which to base the loan.

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I don't think they're proposing to raise minimum down-payments across the board. They're simply proposing that if the down is less than a certain threshold (30% I believe) then the loan originator must retain 5% of the risk. The loan originators are -of course- aghast at this concept, mainly because they've been operating for years under a system where they loan other peoples' money and retain no risk for themselves.

Risk and reward can't be uncoupled without causing problems.

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