Mortgage rule could hurt borrowers: FHA's Ryan

By Corbett B. Daly

WASHINGTON | Wed Apr 13, 2011 5:46pm EDT

WASHINGTON (Reuters) - A proposed rule requiring a minimum 20 percent down payment on mortgages that lenders could then sell to investors without keeping some of the risk on their books might prevent some potential borrowers from getting a loan, a top U.S. housing official said.

While the rule "is designed to create a class of loans that have a lower likelihood of default, in its proposed definition it has the potential to exclude a number of buyers," Acting Federal Housing Administration Commissioner Bob Ryan said in prepared testimony.

Ryan is to deliver his remarks Thursday to a House Financial Services Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises. They were posted on the panel's website on Wednesday.

The Federal Deposit Insurance Corp and the Federal Reserve a few weeks ago endorsed the "qualified residential mortgage" proposal that is intended to restore lending discipline and define the safest form of mortgages that can be completely resold to other investors.

Loans backed by mortgage finance giants Fannie Mae and Freddie Mac and the Federal Housing Administration are exempt from the rule. Together they back almost nine in 10 new mortgages.

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