In housing finance overhaul, all eyes focused on 30-year fixed mortgage

Julie C. Nichols General

The Hill – Vicki Needham

Washington policymakers are fixating on how to preserve the 30-year fixed mortgage amid broader plans to overhaul the housing finance system, but differences remain over how long the government guarantee should go along for the ride.

Some housing industry experts argue that cutting the government’s role too sharply will make the popular 30-year product too expensive for the majority of borrowers and shake the housing market’s stability. But proponents of the government holding a smaller market share — the federal government guaranteed nearly 90 percent of new mortgage loans last year — say that any overhaul of the mortgage finance system that maintains a robust backstop not only leaves taxpayers on the hook again but will allow the market to wade right back into the quagmire that led to the housing crash and near economic collapse.

Meanwhile, President Obama and congressional Democrats and Republicans are touting proposals that they say preserve the popular loan, which is considered the bedrock of the mortgage industry, as part of a broader plan to eventually eliminate mortgage giants Fannie Mae and Freddie Mac. Obama expressed his desire this week, in a series of speeches, to protect the 30-year fixed-rate mortgage and spur private investment while arguing that some level of government involvement is needed to ensure that the loan is available to a majority of middle-class borrowers.

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