Trump proposes 50-Year Mortgage

  • Thread starter Thread starter nycfan
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nycfan said:
Your understanding does not seem to match the early reporting but makes more sense. But it would still likely only apply to new mortgages, not retroactively to existing mortgages.
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Yes...would probably pay some premium on a portable mortgage either in interest rates or initiation fees.
Others have described it as a perpetual line of credit at a locked in interest rate where the line limit can be extended out for a new home purchase. That doesn't really make any sense from a lender perspective.
 
nycfan said:
So, it really is just a guarantee of the same size loan on the same terms for your next house. Why would a lender agree to this for any existing loans below current market rates? Spoiler alert: in current conditions, they won’t.

Presumably, this would have to be limited to new mortgages originated after rules for portable mortgages are established. You still have to pay off the existing mortgage and borrow anew and the terms are probably only portable for an equal or lesser principal amount. If you buy a more expensive house and need a larger principal amount, my guess is the right to retain the mortgage terms would no longer apply. Do you have to pay a premium on the initial mortgage for a portability rider?

I’m not against this in concept, just questioning how it would work in practice and doubting any immediate impact on the housing market.
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I think there would be a constitutional impairment of contracts problem if it applied to existing mortgages. I assumed it would only apply to future mortgages.
 
nycfan said:
So, it really is just a guarantee of the same size loan on the same terms for your next house. Why would a lender agree to this for any existing loans below current market rates? Spoiler alert: in current conditions, they won’t.

Presumably, this would have to be limited to new mortgages originated after rules for portable mortgages are established. You still have to pay off the existing mortgage and borrow anew and the terms are probably only portable for an equal or lesser principal amount. If you buy a more expensive house and need a larger principal amount, my guess is the right to retain the mortgage terms would no longer apply. Do you have to pay a premium on the initial mortgage for a portability rider?

I’m not against this in concept, just questioning how it would work in practice and doubting any immediate impact on the housing market.
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The variable risk for lenders does seem like a serious problem. I’d think the portability feature would come at the cost of a higher rate.

Again, as with a 50yr mortgage, I don’t much care if they offer it, but it is not in any way a solution to the current problem which is primarily one of supply. Until there is something to restrain private investors gobbling up housing on first day listings with cash offers, younger buyers who require significant financing, inspections, and contingencies are not going to be able to compete.
 
wmheel1287 said:
This is where I am. Payment comparisons using the same rate for the 30 vs 50 are silly because we know that is not going to ever happen. The up front fees will be higher. The rate will be higher. If they aren't government backed, no lender is going to touch them at high LTV so nobody new comes into the buying picture anyway. If they are government backed, the risk pool for FHA/VA/USDA grows astronomically so the charges for rhat mortgage insurance go up on every borrower in those programs further exacerbating the issues.
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Are you talking about 50 year mortgages or portable mortgages or both?
 
wmheel1287 said:
Then just do a partially amortized loan and be done with it. There are already a thousand different options.
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I’m assuming the idea is to make the 50 year mortgages government backed and make it more mainstream. What existing product in the marketplace is analogous to a 50 year mortgage that regular borrowers could easily get?
 
Instead of a 50 term/AM, it would be more helpful for the government to subsidize a rate buy down for primary homes, phased out for higher earners. Allow for purchases and refis.
 
What we need more than anything is way more homes built. And in the interim we may need to figure out a way to preference first time and primary home buyers (folks who plan to live in the home purchased) over investors. But that is a hard nut to crack — if you are trying to sell your home, you don’t want the government forcing you to take an offer from someone with a contingency to sell their existing home or obtain a mortgage over someone paying in cash.

There are no magic bullets for a housing market generally and certainly not for a housing market several million short in supply of affordable options. If the interest rate dropped 300 bps tomorrow, then home prices would likely skyrocket due to the limited supply. Maybe we would see a rush of Sellers with 2% mortgages willing to put their home on the market and take a new mortgage on a new place at around 4%, which would improve inventory. But maybe not and they would pressure the demand side, too.
 
nycfan said:
What we need more than anything is way more homes built. And in the interim we may need to figure out a way to preference first time and primary home buyers (folks who plan to live in the home purchased) over investors. But that is a hard nut to crack — if you are trying to sell your home, you don’t want the government forcing you to take an offer from someone with a contingency to sell their existing home or obtain a mortgage over someone paying in cash.

There are no magic bullets for a housing market generally and certainly not for a housing market several million short in supply of affordable options. If the interest rate dropped 300 bps tomorrow, then home prices would likely skyrocket due to the limited supply. Maybe we would see a rush of Sellers with 2% mortgages willing to put their home on the market and take a new mortgage on a new place at around 4%, which would improve inventory. But maybe not and they would pressure the demand side, too.
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In a lot of cities the areas where new starter homes are being built aren't the areas that 30 year olds want to live. In Charlotte, someone living in Southend doesn't want to move out to a new tract starter home in Monroe - commute & cool factor being the biggest reasons. But neighborhoods close in are just too expensive for a first home.
 
I don’t have the numbers in front of me, but I feel the shortage of homes is in desirable markets. There are plenty of homes for sale in Greensboro today. It’s not the lack of houses keeping ppl from buying - it’s the price and the rates. Now - that may be a different story in Boston or even Raleigh. I thought remote work was going to help smooth out home prices, but it does not look like remote work is going to be the rule going forward, but the exception.
 
Enigma94 said:
Portable mortgages sound like a more viable option. The questions I have are if there is an investor market for this kind of product and if so at what price? My suspicion is that given this type of mortgage would almost certainly have a longer average outstanding term, there would be a rate and/or spread premium. On the surface it does seem like something that would free up the market. Wouldn’t be an immediate impact because I don’t think people would be able to convert their mortgage today without moving to a higher interest rate.
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I'm not so sure there would be a premium, at least after the product has been on the market for a while and folks get a better idea of the risk. If you look at it as correctly pricing the risk of the mortgage, you have a person continuing to pay a mortgage that they've been paying for a few years versus that same person taking on a new and often times more expensive mortgage. My investment thesis would be that the person continuing the same mortgage payment would be a better risk than the person taking on a new mortgage payment.
 
Willy said:
Instead of a 50 term/AM, it would be more helpful for the government to subsidize a rate buy down for primary homes, phased out for higher earners. Allow for purchases and refis.
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I agree that this is a strategy worth looking at. Seems a whole lot easier than creating a new market for 50 year mortgages or portable mortgages.

I wonder if economists would puke all over it. Most already don't like the mortgage interest deduction which has similar effects but might cover different people.
 
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C-Money said:
So really people would just be renting their home forever and never own it.
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They would be able to take advantage of the rise in asset prices. That's something that renters don't get and is a big source of wealth for Americans. These new homeowners would also have to take on the burden of repairs which renters mostly don't deal with.
 
gtyellowjacket said:
I'm not so sure there would be a premium, at least after the product has been on the market for a while and folks get a better idea of the risk. If you look at it as correctly pricing the risk of the mortgage, you have a person continuing to pay a mortgage that they've been paying for a few years versus that same person taking on a new and often times more expensive mortgage. My investment thesis would be that the person continuing the same mortgage payment would be a better risk than the person taking on a new mortgage payment.
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The lenders would also have some risk regarding the location of the property. For example if the first home is in Charlotte or Raleigh and the borrower moves to the suburbs of Las Vegas or a condo in South Florida then there may be a different risk profile with the property.
 
NCK9 said:
The lenders would also have some risk regarding the location of the property. For example if the first home is in Charlotte or Raleigh and the borrower moves to the suburbs of Las Vegas or a condo in South Florida then there may be a different risk profile with the property.
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You are exactly right. That might be what torpedoes the whole idea honestly. I can't think of a great way around it.
 
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