Tags: 30-Year | Mortgage | Fading | Memory

NYT: 30-Year Mortgage Seen Fading From Memory for Most

Tuesday, 08 Mar 2011 08:37 AM

The 30-year fixed-rate mortgage, a staple among U.S. homeowners for decades now, may fade from existence for many if the government shuts down mortgage giants Fannie Mae and Freddie Mac, The New York Times reports.

The 30-year loan first became broadly available by an act of Congress in 1954 and, many have been approved with government backing.

Yet the Obama administration as well as Republicans are considering shutting down Fannie and Freddie, which back the loans by buying them and bundling them for sale as securities.
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A Miami home for sale.
 
Should federal guarantees disappear, 30-year loans could be harder to find, says Alex J. Pollock, a former chief executive of the Federal Home Loan Bank of Chicago.

Lenders might demand larger down payments and better credit scores for the few who get them.

The absence of the 30-year fixed mortgage isn't altogether bad for the U.S. economy, Pollock adds.

Longer terms make ownership affordable only by increasing the total cost of the loan.

"One of the reasons that American housing finance is in such bad shape right now is the 30-year mortgage," Pollock.

"For many people, it’s not at all clear that that’s the best product."

Meanwhile Fannie and Freddie, which have cost taxpayers $135 billion in bailout money so far, may return to profitability in 2011 now that they are getting back on their feet as the housing meltdown grows more distant, says Joshua H. Rosner, managing director at Graham Fisher, an independent research company for institutional investors.

"They’ll probably be profitable by the end of the year," Rosner tells Bloomberg.

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The 30-year fixed-rate mortgage, a staple among U.S. homeowners for decades now, may fade from existence for many if the government shuts down mortgage giants Fannie Mae and Freddie Mac, The New York Times reports. The 30-year loan first became broadly available by an act...
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Tuesday, 08 Mar 2011 08:37 AM
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