Transcript: Hearing Q&A with Rep. Bill Huizenga & FHFA Director Edward DeMarco on government conservatorship of Fannie Mae & Freddie Mac

Edited by Jenny Jiang

Partial transcript of Q&A with Rep. Bill Huizenga (R-Mich.) and Edward DeMarco, Acting Director of the Federal Housing Finance Agency, on the FHFA’s conservatorship of Fannie Mae and Freddie Mac. The House Committee on Financial Services Hearing was held on March 19, 2013:

Rep. Bill Huizenga (R-Mich.):
…On a more philosophical question, do we really need 30-year mortgages? We’ve got a neighbor to the north that 30-year mortgages have not been part of their history. They may amortize over that but then there’s one year and sometimes even 6-month, 1-year, 5-year now. They’re now just getting into long-term mortgages…

Edward DeMarco:
Well, as an economist, the notion of need – I don’t think we interpret that quite the same way as everybody else. It’s little hard for me to say – answer, respond to a question about do we need.

I will make an observation about 30-year mortgage however. In some sense, it arose as an affordable product because mortgages used to be – even when fixed rate mortgages became more commonplace, they were 15 years, they were 20 years, maybe 25 years. They kept pushing out the maturity spectrum to make financing more affordable. Not that there’s anything wrong with that, it’s that with a 30-year mortgage you do not really start paying down principal over those first several years.

And one thing I would say about 30-year mortgage is it’s not necessarily the best mortgage product for a homebuyer, especially a first-time homebuyer. If you look at statistics and see that the first-time homebuyers in this country tend to own their first home for 4 years or for 5 years, it may not be the best for their circumstance if they buy that house with that kind of timeline as what they expect. There may be a different mortgage product in which they can build equity at a faster rate than a 30-year fixed rate mortgage.

Rep. Bill Huizenga (R-Mich.):
I appreciate that. And somebody at obviously 60 years of age may be financing or refinancing for 30 years is you’re outside your potential earning power stroke there.


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