Senate to review the 30-year fixed-rate mortgage

Mortgage statement.

Jeremy Hobson: Well now to Washington where a Senate Committee is holding a hearing today on the future of 30-year fixed mortgages. The question is: could the 30-year fixed survive if big changes are made to the government backed mortgage lenders Fannie Mae and Freddie Mac?

Here's Marketplace's Adriene Hill.

Adriene Hill: Thirty-year fixed-rate mortgages let borrowers pay off their home slowly, with payments that are the same from month to month. They're straightforward, they're vanilla.

And, says Walter Maloney from the Association of Realtors:

Walter Maloney: The 30-year fixed rate mortgage is the lifeblood of the housing industry.

All those exotic loans, all the rage during the housing bubble, are out of favor. Nearly all home loans offered today are long-term fixed-rate mortgages.

USC professor Richard Green says there are a couple reasons for that.

Richard Green: Part of it is that the banks are not that interested in doing the loans; Fannie and Freddie specialized in doing fixed-rate mortgages.

So those are the loans that are getting done. Green says there's also a demand issue.

Green: People are very afraid, they're looking for safety, and the longer-term mortgage is a safer mortgage.

He thinks the long-term fixed-rate mortgage is important to have as an option. Other shorter-term mortgages have value too, but he says to improve the housing market, it's not the type of the loan that matters, so much as making it easier and faster to get it.

I'm Adriene Hill for Marketplace.

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Of course 30 year mortgages will be available if they get rid of thw GSE's. Every mortgage option has a price, you just may not like it. Anyway, if a private ivestors don't want the risk of a low interest rate for an extended period, why should we foist the risk on tax payers?

Perhaps our legislators need a reality check. They can't seriously believe that doing away with the 30 year fixed-rate mortgage is a good idea.

The average home price in the suburb of Indy I live in is $350,000. What 'average American family' can afford to pay that back if they're forced into a mortgage with terms shorter than 30 years?

If you think the housing market is sluggish now, watch what happens if this bill makes it through Congress.

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