Check-In: Fate of the 30-Year Mortgage

Discussion and debate on housing finance reform continues on Capitol Hill, with a number of legislative initiatives and committee reports putting forward ideas on how to prevent a repeat of 2008’s massive fiscal crisis. Driven by a tailspin in the mortgage markets, the “Great Recession” continues to dampen economic growth, and has fundamentally altered the dynamics of the real estate market, which generally has yet to realize the promise of recovery. Meanwhile, somewhere in all of the talk, the fate of one of real estate’s most fundamental mainstays—the 30-year fixed-rate mortgage—lies.

The latest news on the 30-year mortgage, NAHB which has been actively lobbying against efforts to establish a mortgage system that could substantially raise costs for borrowers.

The latest news on the 30-year mortgage? Check back after 2012, according to the CEO of the National Association of Home Builders (NAHB), which has been actively lobbying against efforts to establish a mortgage system that could substantially raise costs for borrowers. Once the pending presidential and congressional elections have temporarily cleared pressing political agendas, debate and votes on mortgage reform are likely to occur. Until then, organizations like the NAHB will continue to express concern over some features of current finance reform proposals, including the push to privatize mortgage markets and withdraw federal mortgage-guarantees such as those provided by Fannie Mae and Freddie Mac.

Fannie and Freddie, who have saddled taxpayers with an increasingly burdensome portfolio of faltering mortgage securities, have served as both a backstop and target throughout the mortgage crisis, and some lawmakers have taken the opportunity to insist that the government pull back from its role in the housing industry. The ripple effects of government involvement—lowered borrowing costs and higher general taxpayer liability—have been cited by some as indications that the government has skewed the realities of the real estate market for too long. Private lenders, some lawmakers and lobbyists insist, are the sole way to provide stabilization to the housing market, while relieving taxpayers of the burden of propping up mortgage viability.

The push to privatization, however, has many industry groups concerned. The NAHB, along with a number of social and financial groups, has insisted that privatization means more expensive mortgages that are more difficult to obtain. Limiting financing to a “select group” of borrowers with high credit scores and large downpayments, they argue, will create racial and socioeconomic disparities within home finance, and put homeownership out of the reach of millions of otherwise worthy borrowers. By pricing these buyers out of the mortgage market, some worry, national housing markets could be fundamentally destabilized by the reduction in demand, and the American tenet of homeownership could be threatened.

Whether or not decisions will be made before 2012 on key financial reform measures like the QRM definition remains to be seen. Until then, lawmakers will continue to debate, discuss, meet and draft legislation, while home buyers and home owners across the country look on, waiting.

July 8th, 2011 in Real Estate Trends No Comments »

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