Academic

Last month, the Glom hosted a book club for Bethany McLean and Joe Nocera's new book, All the Devils are Here.  Today, McLean has an insightful editorial in the NYT on the 30-year mortgage.  No one seems to be supporting Fannie Mae and Freddie Mac, and all seem to call for the end of government guarantees of residential mortgages.  However, MacLean points out that ending government guarantees will almost certainly end the ubiquitousness of the 30-year mortgage.  Investors will not want a piece of an unguaranteed residential mortgage that carries the risk that the homeowner will be creditworthy, and the interest rate profitable, for three decades.

Of course, these long-term mortgages wouldn't dry up overnight, but they would only be available to the most creditworthy borrowers, who are willing to make large down payments, at a higher interest rate.  So, what would that mean?  Are we ready to go back to a world where folks have to save more than a few years for a down payment?  Where we have neighborhoods that are filled with owners and renters, instead of owners with substantial equity and owners with very little equity?  Will this make a difference?  We have preached the saving grace of home ownership for so long now it's hard to imagine middle America without the 30-year home mortgage.