WASHINGTON—A panel of three housing finance executives and one regulator expressed strong confidence the 30-year, fixed rate mortgage will remain a key element of the U.S. housing finance market.
The panel, speaking at the Mortgage Bankers Association annual convention included Carol Galante, assistant secretary for housing at the Department of Housing and Urban Development; Michael Heid, president of Wells Fargo Home Mortgage; William McCue, president and owner of McCue Mortgage, a housing finance company headquartered in New Britain, Conn.; and, Thomas Wind, executive vice president at Everbank, a Jacksonville, Fla.-based institution.
Panel members observed that long term, fixed-rate loans remain not only the most popular with consumers, but are among the only loans that will meet new mortgage regulations.
“I can't even imagine the 30-year, fixed rate loan going away,” Heid said. “It plays that central a role and there is nothing on hand to replace it.”
McCue added the prediction that, eventually, the 30-year, fixed rate mortgage will become the only readily available housing finance loan.
“We also cannot underestimate the value of certainty for consumers,” McCue added. “Even if no one really plans to remain in their homes for 30 years, consumers like having a fixed mortgage payment they can plan and budget around.”
Galante acknowledged that housing finance regulations favor the longer term loans, saying they provide market affordability.
McCue expressed some frustration with the topic of restructuring the government's role in housing finance, saying it's unclear what the government role actually is.
“The topic suggests we have a housing policy, when the one thing we really don't have is a housing policy,” McCue said. Continuing to manage from crisis left over from the housing meltdown is not the same thing as having a policy, he contended.
McCue reminded the panel that his father founded his company in 1949, when the U.S. had a policy of helping World War II veterans buy homes, with an understanding of what that meant for families, communities and the economy as a whole.
“We might start the process of reforming the government's role in housing finance if we first decided what the role actually is,” McCue said.
He also attacked the notion that FHA's role in mortgage insurance should be rolled back rather than adapt to the market.
“FHA should have a policy of the home buyers that it exists to serve and a reason why it serves them,” McCue said. “Ninety-seven percent of my first time homebuyers take out FHA loans to buy their homes and then, eventually, sell them and move into non-FHA homes.”
Head agreed and added that FHA, as well as the Federal Housing Finance Board and Fannie and Freddie themselves, should not be paralyzed by failed housing finance reform.
“There are steps all these organizations can take now, without legislation, and they should take them,” Head said.
Whatever form GSE reform eventually takes, the panel agreed more private capital will be necessary for the market to work most efficiently; but, panelists offered different ideas on what government should do to attract private capital.
Wind maintained capital is largely already there, but simply not yet committed.
“What the GSEs need to do is take the steps to draw in that high credit quality, triple-A investor who still wants to invest but needs to have more confidence,” he said.
Head agreed and added this was a key reason Congress needed to finish GSE reform, to reign in secondary market insecurity. He also added GSE reform was needed to clarify the market and encourage competition.
McCue urged the government to take additional steps to bring more mortgage loans into the market, such as making clear that FHA loans are, by definition, qualified mortgages.