A Republican lawmaker wants Fannie Mae and Freddie Mac to buy portable mortgages to open up much-needed housing supply.
U.S. Rep. Tom Kean, R-New Jersey, introduced the Making Ownership Viable for Everyone, or MOVE Act, Monday. The law would require the government-sponsored enterprises to begin purchasing and securitizing mortgages in which homeowners can transfer their existing rate, terms and balance to a new property.
"I wrote this bill … to give homeowners more freedom, help put more homes on the market, and make the American Dream of owning a home more attainable for families across New Jersey," said Kean in a press release this week.
The congressman said he heard from residents who are experiencing the so-called lock-in effect, who are ready to move but unwilling to ditch their current mortgage rate. The trend emerged earlier this decade as ultra-low rates began their steep climb. Meanwhile, real estate watchers reported mixed attitudes towards selling by those borrowers earlier this year.
In a spring survey, Coldwell Banker reported more than a third of sellers had mortgage rates below 5%. The average 30-year fixed rate mortgage closed July at 6.81%, its highest mark in over a year.
Portable loans, in which the loan moves with the borrower, are different from assumable mortgages, in which the loan stays with the property. Government-backed loans can be assumed, and interest in the transactions grew as rates soared past 7% a few years ago, although the transactions are a small part of the mortgage market.
The GSEs restrict assumable loans for fixed-rate mortgages to certain circumstances like death and divorce. Bill Pulte, the director of the Federal Housing Finance Agency which oversees Fannie and Freddie, suggested last November the government was mulling adopting assumable or portable loans, but he hasn't provided an update.
Another housing bill
Keane noted that he also introduced the Make American Housing Affordable Act in January, a bill that would establish an up-to $10,000 tax credit for many primary homebuyers. That bill hasn't gained any traction in the interim.
Congress' most significant bill to address the housing market came last month, with the passage of the 21st Century ROAD to Housing Act. That law introduced various measures to promote homebuilding, such as easing manufactured home development and curbing some investor purchases. Experts however suggested that law would take years to generate savings for both lenders and buyers.
