WASHINGTON-In testimony to Congress last week, John Fenton, president and CEO of Affinity FCU in Basking Ridge, N.J., said the 30-year, fixed-rate mortgage could become a thing of the past if the federal government does not have a significant role in housing finance.
Testifying on behalf of NAFCU, Fenton told the Senate Committee on Banking, Housing and Urban Affairs, "Without a government role in the secondary market, the 30-year [fixed-rate mortgage] may still exist, but likely with higher cost to the consumer and scarce availability. The system of long-term, fixed-rate mortgages financed through stable securitization has helped provide remarkable stability in the U.S. economy, as well as strong and sustainable ownership."
Fenton said the 30-year loan, which makes up 48% of all outstanding mortgages, is the most popular among his credit union's members because it is the most affordable. Since credit unions cannot raise funds from the capital markets, the government-sponsored enterprises fulfill an essential role in ensuring credit unions have access to mortgage liquidity, Fenton told the committee.
Fenton said credit unions feel it is very important to retain a system that preserves the credit unions' access to mortgage liquidity, including through the secondary market.
Moreover, Fenton underscored the importance of maintaining a strong secondary mortgage market with at least two government-sponsored enterprises going forward to preserve that availability, regardless of what happens with Fannie Mae and Freddie Mac.
"The 30-year fixed-rate mortgage product remains the most popular mortgage product available today," said Fenton. "As such, it is necessary for the health of our housing market and continued recovery of our economy that it remains readily available. The ability of credit unions to make these loans and mitigate their interest rate risk by selling these loans to GSEs on the secondary market is as important to economic vitality as their availability in the marketplace."
