Wednesday, March 11, 2009

20% down

There has been a lot of discussion about how to fix the current economic mess but less about measures to prevent similar troubles in the future. Here is a suggestion. Prohibit more than 80% financing for real estate purchases. In other words require 20% down. This would probably reduce the home ownership rate but it is not sound public policy to maximize the home ownership rate at all costs. Many people are better off renting.


  1. How about also banning "teaser" rates that are so low that the balance owed actually increases at first?

  2. There are other things that could be done of course. However the purpose of requiring 20% down is to protect the lenders (and the system)not the borrowers.