30-year fixed-rate mortgages to end?

We have left the industrial age and we are clearly in the information age with fast news and a faster American pulse than in the past generations.

Gone are the days where you go to work at Acme Widget Company and look forward to your gold watch after 30 years of service. You had a 30-year fixed rate mortgage and your home got paid off. 

Those days are getting further away with the recent announcements that the Obama administration, with the support of quite a few Republicans, is  moving to shut down Freddie Mac and Fannie Mae.

This will end the days of government-backed loans. We are one of the last industrial nations to have this backing.

 This signals the end of the 30-year fixed rate mortgage and ultimately a less cyclical housing market. Those loans will be replaced with a 5/1 loan instead. These new loans will reset every five years with the current interest rate but also be portable when you sell and move. 

The idea is that the loans that are being used today for home purchases that have a 4.8 percent interest rate are not sustainable for banks when they have to pay 3.5 percent in a few years and the  current rate is 6 percent.

There is also talk that with this type of home loan purchases that many will opt to rent. That is the short-sighted thinking and the true real estate investors have known for years that there are great adjustable rate loans that outperform fixed rate loans.

“Private mortgage insurance for FHA loans is going to be bumped up soon by another quarter percent and that rates seem to be settling at about 5.5 percent,” said Dan Stevens of Wells Fargo home loans.

 “There is a new document that will be added to the loan process for short sales," said Steve Vail of High Tech Lending. "It will give the seller $3,000 at closing for moving costs, but they will have to sign a paper stating that they have not committed fraud for the past 10 years.”

OPEN HOUSES

429 Sherman St., 3 bedrm, 2 bth, $789,000.

106 Parkwoods Ct., 3 bedrm, 2 bth, $529,000.

722 University St., 4 bdrm, 2 bth, $950,000. .