New Groundwork Paper Outlines Concrete Federal Action to Lower Mortgage Payments for American Families
New Groundwork Paper Outlines Concrete Federal Action to Lower Mortgage Payments for American Families
Experts call on federal government to cut mortgage insurance premiums, enable mobile mortgages, offer direct lending for consumers, and bring transparency to the mortgage market
As the Trump Administration’s policies continue to stretch consumers’ budgets, a new paper from the Groundwork Collaborative calls on the federal government to provide material relief for overburdened homebuyers. In Unraveling the Mortgage Maze: How Government Can Make Homeownership More Affordable for American Families, Groundwork expert Emily DiVito and Former Deputy Director of the National Economic Council Bharat Ramamurti suggest four targeted policy recommendations to reshape the mortgage financing system in favor of consumers and save them thousands each year.
The cost of homebuying is out of control. In just five years, the median income a family must earn to be able to afford a home has increased by nearly 50% to $117,000. Thanks to unreasonably high mortgage rates, for-profit financial intermediaries, and a growing housing shortage, what was once a hallmark of the American Dream is now a distant mirage.
Mortgage affordability isn’t just a financial issue: 71% of first-time buyers said the homebuying process was more stressful than finding their first job. Further, consumers are at their wits’ end navigating the thousands of banks, brokers, and other financial intermediaries populating the complicated mortgage landscape, and it’s costing them. The Consumer Financial Protection Bureau finds that more than 30% of borrowers do not comparison-shop for their mortgage, and more than 75% apply for a mortgage at only one lender, costing the average homebuyer over $300 per year.
In the paper, the authors write:
“At a time when American families are struggling with a severe housing affordability crisis, relief for overburdened consumers requires the federal government to reshape and strengthen its role in the mortgage financing system. So far, however, the proposals from President Donald Trump and Federal Housing Finance Agency (FHFA) Director Bill Pulte would do little to ease borrowers’ financial burdens — and might even make them worse.”
Four Policy Solutions to Open the Door to More Affordable Ownership
- Slash mortgage insurance premiums to save families money over the life of a loan. Each year, millions of homebuyers must take out costly mortgage insurance to protect their lender from the risk of their default. These costs can run families thousands of dollars each year.
- Regulators should cut mortgage insurance premiums to put money back into the pockets of borrowers.
- Make mortgages portable and assumable for families looking to move. To alleviate rising mortgage costs, lenders must expand access to so-called assumable and portable mortgages, whereby a buyer can either assume the existing mortgage rate of the seller, or bring their current rate with them to their new home. Mobile mortgages would help lower mortgage costs for families, stimulate homebuying, and alleviate existing housing shortages.
- When mortgage rates started to climb in 2022, immobile mortgages prevented an estimated 1.7 million home sale transactions and increased home prices by 7%.
- By the authors’ calculation, a family able to utilize a mobile mortgage could save as much as $5,078 annually on their mortgage costs, compared with a market rate mortgage.
- If you like your mortgage rate, you can keep . Consumers should be able to lock in the rate that’s best for them, regardless of address change.
- Pass on the government’s borrowing power to homebuyers. While the federal government has backstopped the mortgage industry for decades, it doesn’t pass its power as a direct lender on to consumers. The government should extend its low cost of borrowing to prospective homebuyers by directly financing mortgages at lower rates than commercial lenders.
- Implement accessible, transparent pricing platforms to discourage industry collusion and opaque fees. A lack of transparency and navigability in the mortgage market prevents consumers from comparison shopping and drives up costs.
- A centralized online platform where all lenders must list their terms, fees, eligibility requirements, and customer service information would empower consumers to navigate a safer, more straightforward marketplace on their own.
