WASHINGTON–Just days after floating a proposal for mortgages with 50-year terms as a means of making housing more affordable, the Trump administration has another idea to accomplish the same: Let homeowners take their mortgage rate with them when they move.
Federal Housing Finance Agency Director Bill Pulte said the administration is “actively evaluating” so-called portable mortgages, according to CNN.
The White House was reportedly “furious” for Pulte’s original plan for the mortgage with the half-century term and for convincing President Trump to speak in favor of it. The plan was widely condemned by many housing experts for significantly boosting the amount of interest borrowers would pay over the life of a loan.
But the criticism has apparently not dissuaded Pulte, who oversees Fannie Mae and Freddie Mac, from also proposing another plan, in this case the portable mortgages.
‘Stubbornly Stuck’
Just over half of homeowners with a mortgage have a rate below 4%, according to a Redfin analysis of FHFA data, cited by CNN.
“However, average mortgage rates have remained stubbornly stuck between 6% and 7% for the last few years,” the report noted. “Homeowners who locked in ultra-low mortgage rates have been less willing to move and potentially pay hundreds more in interest each month on new mortgages at current rates.
“Allowing people to keep their lower mortgage rates could encourage them to move and free up supply,” the report continued.
Some Questions Raised
But there are questions about how that would work and whether it might wind up actually raising mortgage rates overall, Susan Wachter, a professor of real estate at the Wharton School of the University of Pennsylvania, told CNN.
When asked by CNN, the FHFA did not provide further details about its plans for portable mortgages. In a statement, a spokesperson said the agency was studying a “wide variety of options” to lower housing costs.
A portable mortgage allows a borrower to transfer their existing mortgage and mortgage rate to a new property when they move, instead of taking out a brand-new loan, but there are questions around whether the lower rate would apply to the total amount borrowed or just to the amount of equity in the prior loan.
And given the mortgage contracts involved, one analyst told CNN the plan is a “logistical nightmare.”
Additional Hope
Behind the plan is the hope is that if homeowners could move without losing their low rates, more homes would go up for sale, giving buyers who’ve been locked out a better shot, Wachter told CNN.
The administration also brought up potentially allowing more assumable loans, meaning homebuyers can take over a seller’s existing mortgage and mortgage rate, CNN added.
