Is the 30-Year Mortgage Dead?

The answer is … it could be.

I have previously talked about the debate in Washington over mortgage interest deductions, capital gains exemptions, and other home owner benefits being in danger. But Fannie Mae and Freddie Mac loom at an even higher percentage that change may make the 30 year mortgage at least unaffordable or non-existent, and here is why I think so.

There are three bills pending in Congress that involve reforming or eliminating Freddie Mac and Fannie Mae, despite their huge profitability now that lenders are doing their jobs properly again. The three are The Housing Finance Reform and Taxpayers Act, The Corker-Warner Plan, and The PATH Act. It is possible that those two institutions will be reformed and there will still be a government guarantee the private sector will have, but most of our D.C. elected officials from Oklahoma favor the outright elimination of any government involvement in mortgage lending, and many more agree so let’s explore what that would mean.

Bill Gross, the founder of PIMCO, a global money management company, has said government guarantees on loans like with Fannie Mae keep rates down about 3%. We are quickly heading toward 5% 30-year rates, so the outright elimination of government guarantees in this scenario means 8% rates on 30-year mortgages. Ask yourself how this would affect your clients? A first-time buyer may be out of the market or jumbo borrowers may decide to just stay put.

Another possibility is we would go to a Canadian system where the maximum amortization schedule is 25 years and fixed rates are not guaranteed and are reset every 5 years. How would this affect the confidence in your buyers and sellers knowing rates could adjust dramatically?

Now I have a question for you. Do you care?

We struggle every year to get even one-third of our statewide members to give as little as $15 to RPAC so we can have a voice to keep the 30 year mortgage and preserve VA and FHA loans. For the price of two drinks at a bar, a couple of Happy Meals, a few lottery tickets or a trip to one movie (popcorn excepted), you could help preserve home owners’ rights. You might also save your career. Because if we lose these: the interest deduction, and the capital gains exception on selling a home, or if we do what D.C. did and others are trying to do which is to charge buyers and sellers an added 1.45% transfer fee that translates to $300 million a year taken from citizens, you just might be embarking on a new career.

Don’t be complacent and think, “Well, this is not the banks taking over and eliminating 90% of REALTORS® in the process like we successfully fought before.” No, it is not, but if we lose 10 battles, or even five, the right and privilege of owning a home may be put out of reach of the average American. If banks can charge 3% more on a loan, or reset at their pleasure, don’t you see the banks just found the back door to controlling this trillion-dollar business?

The leadership team at OAR are major investors, and even employees at OAR are major investors to RPAC. If you can’t give at least $15, why are you here? Your investment tells the world you support candidates and policies that benefit you, your clients and the real estate industry.

Go ahead. Make your investment today!

 

Investments are not deductible for income tax purposes. Investments to RPAC are voluntary and are used for political purposes. The amount suggested is merely a guideline and you may invest more or less than the suggested amount. You may refuse to invest without reprisal and the National Association of REALTORS® or any of its state associations or local boards will not favor or disfavor any member because of the amount invested. 70% of each investment is used by your state PAC to support state and local political candidates. Until your state PAC reaches its RPAC goal, 30% is sent to National RPAC to support federal candidates and is charged against your limits under 2 U.S.C. 441a.

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