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Trump & Pulte’s 50-Year Mortgage

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Politico quoted me in ‘Band-Aid,’ ‘Distraction’: Experts Slam Pulte, Trump 50-Year Mortgage Idea. It opens,

The Trump administration is entertaining a potential plan for the government to back 50-year mortgages to address a housing affordability crisis.

But, in a housing market defined by low supply, industry experts warn that changes in financing are likely to be little more than a “band-aid” and a “gimmick,” while posing bigger risks to homebuyers.

“As a country, the mortgage term is not what we should be worried about. We should be focused on building more supply,” said Troy Ludtka, senior U.S. economist at SMBC Nikko Securities America.

Federal Housing Finance Agency Director Bill Pulte posted on X Saturday that the Trump administration is working on directing government-owned housing finance companies Fannie Mae and Freddie Mac to support 50-year home mortgages, calling the move ”a complete game changer.” President Donald Trump also posted on his social media platform, Truth Social, supporting the idea.

The proposal comes after Trump directed Pulte to leverage Fannie and Freddie to ramp up the country’s stalled housing production to bring down costs and address the estimated shortage of 4.7 million homes. But the new proposal is raising concerns about whether such a major change to the two giant mortgage financiers’ buying rules could destabilize a central strength of homeownership — the opportunity to build wealth over time.

In a series of follow-up posts over the weekend, Pulte wrote that “a 50 Year Mortgage is simply a potential weapon in a WIDE arsenal of solutions that we are developing right now. STAY TUNED!” He sounded off about other possible ideas like supporting portable mortgages, which can transfer to a new property, and assumable mortgages, which can be transferred to a property’s new buyer.

An FHFA spokesperson told POLITICO, “We continue to evaluate all options to address housing affordability, including studying how to make mortgages assumable or portable.”

And a White House spokesperson said in a statement, “President Trump is always exploring new ways to improve housing affordability for everyday Americans. Any official policy changes will be announced by the White House.”

Experts expect that extending the potential length of Fannie- and Freddie-supported home loans would require congressional support.

Fannie and Freddie don’t offer loans directly to potential homebuyers; instead, they purchase mortgages from lenders to package and sell on the secondary market. This frees up resources for lenders to issue new mortgages.

By purchasing 50-year mortgages, Fannie and Freddie could make the longer-term loans more appealing for lenders to offer. With a longer loan, monthly payments could come down, but it also comes at a cost to homebuyers.

“It would lead to buyers building equity in their homes more slowly. At the beginning of the mortgage, more of those payments tend to be interest… This is more of a stopgap band-aid to address affordability,” said Gennadiy Goldberg, head of US rates strategy at TD Securities.

Sharon Cornelissen, director of housing at the Consumer Federation of America, called the proposal “a distraction” and warned that although expanding the accessibility of 50-year mortgages could lower monthly payments, “the cost of that is that people won’t be able to build wealth through homeownership.”

And as first-time homebuyers get older, the 50-year mortgage appears less manageable, Cornelissen said. Last week, the National Association of Realtors shared findings that the median age of first-time homebuyers had risen to an all-time high of 40.

“So you’ll be 90,” Cornelissen said, adding that finishing payment on a 30-year mortgage is a “stabilizing force” for people going into retirement.

David Reiss, a Cornell Law School professor and real estate finance researcher, said a move toward 50-year mortgages would require homebuyers to rethink how they save for retirement.

“We often hear financial advice that you want to try to pay off your mortgage before the time that you retire,” Reiss said. “So that’s a problem.”

A Framework For Housing Finance

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The Government Accountability Office has released Housing Finance System: A Framework for Assessing Potential Changes. The GAO writes,

To help policymakers assess various proposals for changing the single-family housing finance system and consider ways in which the system could be made more effective and efficient, we prepared this report under the authority of the Comptroller General. Specifically, this report (1) describes market developments since 2000 that have led to changes in the federal government’s role in single-family housing finance; (2) analyzes whether and how these market developments have challenged the housing finance system; and (3) presents an evaluation framework for assessing potential changes to the housing finance system. (2)
It is useful to have a framework to figure out what kind of housing finance system we want for the 21st century. The GAO’s has 9 elements:
  1. Clearly defined and prioritized housing finance system goals
  2. Policies and mechanisms that are aligned with goals and other economic policies
  3. Adherence to an appropriate financial regulatory framework
  4. Government entities that have capacity to manage risks
  5. Mortgage borrowers are protected and barriers to mortgage market access are addressed
  6. Protection for mortgage securities investors
  7. Consideration of cyclical nature of housing finance and impact of housing finance on financial stability
  8. Recognition and control of fiscal exposure and mitigation of moral hazard
  9. Emphasis on implications of the transition (54-55)
This all sounds very Yoda-like, but the report itself goes into great detail as to what each of these 9 elements means. Given that Congress has left the housing finance system to its own devices, it is helpful that other branches of government like the GAO, Treasury and the FHFA are trying to move us beyond our current state of limbo. We need a housing finance system that is designed to last longer than the Band Aids and duct tape that were applied to it during the financial crisis.