The Federal Housing Finance Agency indicated this week that Fannie Mae and Freddie Mac will lower their down payment requirements
from 5% to 3% for some borrowers in an attempt to expand mortgage availability.
According to the Wall Street Journal
, Robert Toll, founder and executive chairman of Toll Brothers, called the proposed loosening of credit standards “a really dumb-ass idea” during the Urban Land Institute conference in New York.
“Yeah, we have a slow recovery, but it appears to be going to continue,” Toll said, adding, “Why do we want to go do what got us into this problem in the first place? … 3% down doesn’t make any sense.”
But some home builders expressed different views about the new mortgage standards. In PulteGroup’s third-quarter earnings report, Richard Dugas, Jr., chairman, president and CEO of PulteGroup, said, “We are encouraged by proposed changes at FHFA which have the potential to improve mortgage availability, particularly for first-time homebuyers.”
Larry Nicholson, CEO of Ryland Group, echoed Dugas’ sentiments adding, “I don’t think anybody is a proponent for going back to what happened in 2006 or 2007 at all, but a little common sense goes a long way. I do think it helps the entry-level buyer with the 97% (loan-to-value) program. I think that will get some people off the fence,” according to the article.
While other home builders are praising regulators’ move this week to ease mortgage standards, luxury home builder Toll Brothers Inc. finds the idea dumb.