Reality Check: Bye-bye 30-year mortgage? Congress considers major changes
Sen. Sherrod Brown, D-Ohio. File photo
Fannie Mae and Freddie Mac have come a long
way since their multi-billion dollar taxpayer bailouts, paying back every cent
while backing 80 percent of all 30-year fixed mortgages since their government
Now comes word that Congress is close to phasing out the mortgage
giants, a decision that could keep the dream of home ownership out of reach for
millions of Americans.
In fact, lawmakers are set to vote this fall on
bi-partisan legislation that would shutter Fannie and Freddie in five years
while creating a new agency: The Federal Mortgage Insurance Corporation, which
would back up private mortgage companies that would provide most of the loans.
Sen. Sherrod Brown, D-Ohio, sits on the committee that authored the legislation.
He tells FOX19 that as written, it could price millions of low and middle
income Americans out of home ownership.
"I want to make sure that
middle income and people have enough financial where with all to be able to
purchase at least a starter house and a modest house at a modest price and that
they have the ability to do that," he said.
The senator has cause for concern: Shutting down Fannie and Freddie will likely
put an end to the 30-year fixed mortgage, replacing it with 10 or 15-year
Taking a look at the current median price for a home in Cincinnati
and using an online mortgage calculator factoring in today's average mortgage
rate along with a 10 percent down payment, the 30-year monthly payment is $482.76. Now,
taking a look at the same house with a 15-year mortgage. The payment soars to
$752.76 per month, and that's with a 10 percent down payment. Some are predicting that
without Fannie and Freddie as guarantors, down payments are likely to go to 20 percent
minimums across the board.
another reason for sparing Fannie and Freddie: Not only have they paid back
every dime of their $187 billion taxpayer bailouts, they've become cash
cows for the government.
In the first quarter of this year alone, the
government received $6 billion in dividends and will receive billions
more this quarter. Fannie and Freddie aren't dead yet and there are reportedly
a growing number of lawmakers concerned that doing away with the mortgage
giants is a mistake.
But if you're saving for a house, you may want to think
about buying sooner rather than later.