Federal Housing Finance Agency Director Bill Pulte has indicated that the agency is considering the introduction of portable mortgages. This type of mortgage would allow homeowners to transfer their existing loans when moving to a new home, potentially keeping their current interest rates rather than taking out a new loan at current market rates.
The goal of portable mortgages is to stimulate a sluggish housing market. Many homeowners are hesitant to sell their homes because they don’t want to give up their low mortgage rates, which have been below 3%. In contrast, current rates are around 6.5%.
While the idea sounds appealing, Realtor.com senior economist Jake Krimmel has expressed skepticism about its feasibility. He argues that portable mortgages do not align well with the current structure of the U.S. mortgage system and may not address the broader housing affordability issues.
Krimmel described Pulte’s proposal as a “brute-force attempt” to counteract the “lock-in effect,” where homeowners stay put due to favorable mortgage terms. However, he noted that the lock-in effect only accounts for about half of the reasons behind declining mobility in the housing market.
When homeowners move today, they typically pay off their existing loans and secure a new one at the current rate. Although portable mortgages could make mobility easier, they would primarily benefit those who already hold low-rate mortgages. Renters and those without mortgages would still be subject to prevailing market rates.
Furthermore, Krimmel highlighted serious concerns about how portable mortgages would function within the U.S. mortgage framework, which relies on securitization—the process of pooling loans to manage risk. If mortgages became portable, it would complicate the risk assessments for investors, likely leading to higher mortgage rates as investors demand compensation for increased risk.
In summary, while portable mortgages could theoretically enhance homeowner mobility, they might introduce complex challenges and unintended consequences that could outweigh their potential benefits. The debate continues regarding how to best navigate current housing market challenges while keeping the needs of homeowners in mind.
