National / International News
Picture a mortgage, and you're likely imagining a down payment of 20 percent of the price of the house.
"I think the 20 percent down payment has become the default, no pun intended," says Jonathan Miller, president of Miller Samuel Real Estate Appraisers and Consultants. "To many homeowners, I think it symbolizes a commitment."
The requirements of Fannie Mae and Freddie Mac — the government-backed entities that support the vast majority of new mortgages — are the most obvious reasons the standard applies today.
"Under Fannie and Freddie's rules, you can get a lower down payment mortgage, but that then requires extra payment in the form of mortgage insurance," says Susan Wachter, professor of real estate and finance at the University of Pennsylvania's Wharton School.
The history of that requirement dates back to the Great Depression. According to Wachter, before the 1930s most mortgages were short-term and non-amortizing: a home buyer had to either pay off the whole house in a lump sum after a few years, or roll over the loan at a new interest rate. Down payments, on the other hand, were typically more than 30 percent.
After the resulting foreclosure crisis and construction halt — similar to what happened after the recent financial crisis — the government created the Federal Housing Administration, which backed mortgages, but required a 20 percent down payment. After World War II, the Department of Veterans Affairs and the FHA adopted a 30-year, fixed-rate standard. By the mid '50s, most mortgages fit that description.
But 30-year, fixed-rate, 20 percent-down loans weren't strictly the result of government-sponsored enterprises, or GSEs.
"When I bought my first home it was $22,000 and I had to put 20 percent down, and it was a conventional loan," says Chris Polychron, president-elect of the National Association of Realtors. "The conventional lenders mimicked what the GSEs did."
Since the 1950s, 20 percent has remained the average down payment — with the exception of the run-up to the financial crisis in 2008. But how did 20 percent become that dividing line in the first place, back in the 1930s? As with so much of our economic life, it’s anybody’s guess.
"I would speculate if you scored 80 percent, you’re a B-minus student, and I guess that means you’re above average," says Miller. "So maybe that has something to do with it."
Johnson & Johnson is the latest pharmaceutical firm to say it will join the race to find a vaccine for Ebola. The firm has even been talking with rival GlaxoSmithKline about ways to collaborate to speed up development.
That urgency speaks to the idea that while the epidemic is well under control in the U.S., it’s out of control in West Africa, where the World Health Organization reports nearly 1,000 people have been infected in just the past week.
“What you are seeing is a collaboration among industry, a collaboration with governments, a collaboration among charities to address what is becoming a horrific public health crisis,” says GSK’s Donna Altenpohl.
Until recently, developing a vaccine wasn’t viewed as lucrative in the industry. But Adel Mahmoud, former President of Merck Vaccines says the power of this virus is persuasive.
“What has changed today is failure of almost all control methods that we now exist,” he says.
Mahmoud says with public health efforts like quarantine and containment falling short it’s now obvious a vaccine is essential. With millions of Africans in need as well as medical workers worldwide, Mahmoud says it’s clear there’s a huge market.
It’s not clear how profitable that market will be. But believe it or not, that’s a secondary concern right now to drug makers, says USC economist Joel Hay.
“They hope if they develop good vaccines they can be compensated at some point. But I don’t think they are doing this out of a profit motive, they are doing it because they believe it’s the right thing to do,” he says.
Certainly down the road, the company that comes up with a vaccine first could score a major public relations win. But right now, Hay says, nobody – including the drug makers – stand to benefit if Ebola spreads beyond West Africa.
“Just think what would happen if people though that airplanes were not safe to fly in. the economy could be devastated very quickly,” he says.
Hay says for pharmaceutical companies in the business of making people better it’s gut check time.
The DNA in this ancient Siberian leg bone shows that the man had Neanderthal ancestors — yet more proof that humans and Neanderthals interbred. And he lived much farther north than expected.
The official rulebook that allows federal employees paid time off has a very long list of legitimate reasons to miss work and still get paid. Perhaps you're donating blood? Maybe an organ? Or you have to go to a Boy or Girl Scout jamboree?
But what if you're accused of a crime or of misbehavior in the workplace, and are in the process of an investigation? In that case, stay home...and still get paid. The total number of workers on paid administrative leave? Well that's a number that the government does not track.
"The real tension point here, I think is that they end up being at home for months, and in many cases years, while their cases are investigated," says Washington Post reporter Lisa Rein.
Listen to the full conversation in the audio player above.