The 30-year fixed-rate mortgage may be under siege in some quarters, but not at the Mortgage Bankers Association convention in Atlanta, where it was defended as on par with motherhood and apple pie.
Fannie Mae President Michael Williams said the importance of the basic, plain vanilla 30-year home loan cannot be overstated. Noting that 95% of today's buyers opt for the safe-and-sound mortgage, he said it is a "key component" of the housing finance system.
"People value it, people are happy with it," he said.
And not just Americans, added Ginnie Mae President Ted Tozer, who told the convention that America's bread-and-butter mortgage is the envy of the world. "It's something we should be proud of," he said. "It works very well."
Tozer pointed out that the alternative to fixed-rate loans are mortgages in which the rate is adjusted from time to time, and they might not work very well in the current low interest rate environment, when even slight changes in a rate are magnified.
For example, if rates were to rise from 4% to 6% over the course of a year or two, borrowers would face a 33% jump in their mortgage payments.
