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Bank of America Opens Debate on Lowering Mortgage Down Payments

Brian Moynihan, Chairman of the Board and CEO of Bank of America Corporation, the United State's fourth-biggest mortgage lender, said on Thursday banks would be able to supply a bigger share of funding for home purchases if the standard down payment for buyers was cut to 10 percent from 20 percent.

"Our goal - going back to regulatory reform - is should you move the down payment requirement from 20 percent to 10? It wouldn't introduce that much risk but would actually help a lot of mortgages get done."

Bank of America has ceded market share partly because, unlike peers Wells Fargo (WFC.N) and JPMorgan Chase & Co (JPM.N), it does not acquire mortgages from other lenders.

The vast majority of mortgages are underwritten to strict standards set by the U.S. government or quasi-government entities Fannie Mae (FNMA.PK) and Freddie Mac (FMCC.PK). While down payment requirements can vary, they offer fairly little latitude to lenders that do not want to take all the risk themselves. As a result, many prospective homebuyers who cannot come up with a 20 percent down payment are unable to get a loan.

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