Topic: Why the 30-Year Mortgage Could Be Coming to an End

[LadyVirginia]

The Housing-Finance Reform and Taxpayer Protection Act of 2013: Also known as the Corker-Warner Pan, this bill proposes to eliminate Freddie Mac and Fannie Mae and generally kick direct government involvement with mortgage loans to the curb. The bill would give private lenders license to run the nation's mortgage system -- not just as loan originators, but also as issuers of mortgage-backed securities.

The Protecting American Taxpayers and Homeowners Act: Also known as the PATH Act, this mortgage reform bill ends the bailout of Fannie and Freddie, which Congress estimates at $200 billion, and phases out the entities within five years. It also calls for a reduction in the government-sponsored enterprise/Federal Housing Authority loan limits, and gives residential borrowers more mortgage loan options.

Here's where the elimination of the 30-year mortgage comes into play. Both bills knock Fannie Mae and Freddie Mac out of the equation and the resulting loss of loan guarantees would change the loan market in a major way. As Approved Mortgage puts it:


Eliminating Fannie and Freddie would mean that conventional loans, like the 30-year mortgage, would no longer be guaranteed. What that means for consumers is that long-term, fixed-rate loans would become too expensive to be an option. And with traditional, fixed-rate mortgages comprising the majority of the market, a loss of guarantee could be disastrous.

link

the ending sentence:

The company notes that any big changes are "years away" -- but that the wheels have already started rolling.

It's all in the future, folks. This won't affect you.  Carry on.

[warpmine]

This, if passed( I know Obama would never sign it), would let the market determine what a house is worth driving prices back down to where they're supposed to be. Borrowers would have to put up some serious capital before an institution would assume the risk which is what I did 25% of the purchase price. I'm not complaining because I'm invested in my own future opposed to what many of the 3% investors did. It was easy for many of them to pick up and run back to Mommy with the insurance companies holding the bag(s).

[Weisshaupt]

Yeah, I don't have a problem with this.  The only reason the 30 year mortgage exists in the first place is because FDR created these entities to guarantee them. Before then, banks required 50%  down and could call your loan at any time.  However, I doubt the removal of the govt guarantee would result in going back to that system. The guarantee was needed then mostly because it had never been tried, and loaning money over 30 years was considered insane. But the fact is :  Banks make money on these loans - at least in normal times when substantial rates of interest are charged.  Warpmine is right - this would probably make the market less volatile  and less susceptible to bubbles and return prices to "normal"  - but historically Housing prices have been almost a direct function of income, and don't vary a lot  by interest rate. but they do vary some. So I don't think this would be a bad thing.  But then I think going to a flat tax and eliminating mortgage interest deductions etc would be a smart thing to do as well.

[Libertas]

On the flip side wouldn't the FreeShyt! Army be hosed since most of them don't save or work anyway, so a massive short-term spike in Sec.8 Housing seems a given.  But like in the days of old one would have to work to get ahead or accept their station in life in the slums.  I have no problem with that, but given the political, cultural and economic direction of our nation this simply is not going to happen, hence their caveat that this thing (and any like it) are "years away".  Years?  More like decades, possibly a century.  We will have collapsed well before then so the point is moot.

[Glock32]

Another thing it would do is bring people back down to Earth as far as their expectations of what sort of lifestyle they can live. No more McMansions everywhere. People suddenly realizing they need to put down 20% or more of the purchase price would start to seriously reevaluate what a realistic purchase price is for them.

[Weisshaupt]

Another thing it would do is bring people back down to Earth as far as their expectations of what sort of lifestyle they can live. No more McMansions everywhere. People suddenly realizing they need to put down 20% or more of the purchase price would start to seriously reevaluate what a realistic purchase price is for them.

I am appalled at how many people are willing to put down less than 20% - just the PMI  should put the kabosh on that. My kids have already heard that lecture a dozen times and tare too young to get their first real jobs yet.  20% on t a House. Credit Card paid off every month.  EVERY. MONTH.  They are going to hear my voice inside their heads every time they pay bills.  And its really amazing how expectation have changed. The "American Dream" used to be a suburban tract home, with a yard,  some modern appliances, 3 beds, 1 bath and 1 car. No granite countertops, stainles steel appliances, cable, big screens, a car for every driver and so on.

Somewhere that's Green

Everything is amazing and nobody's happy.

[Libertas]

I'm waiting for Japanese-style multigenerational loans so succeeding generations can continue to live in McMansions.  Home-ownership is a right, ask any Democrat.

[warpmine]

I'm waiting for Japanese-style multigenerational loans so succeeding generations can continue to live in McMansions.  Home-ownership is a right, ask any Democrat.

Yes and apparently so is healthcare and stupidity.

[Libertas]

I'm waiting for Japanese-style multigenerational loans so succeeding generations can continue to live in McMansions.  Home-ownership is a right, ask any Democrat.

Yes and apparently so is healthcare and stupidity.

To them healthcare is a right, stupidity isn't a right, just a natural state of being for them.  As long as Gubmint gives them a roof over their head, a teat in the mouth and fresh diapers on the bum...what use have they for intelligence?

[ToddF]

Nothing feels better than being under 50 (for a little while longer  ) and being debt free.   I never paid on any of my homes longer than 7 years.