Reality Check: Bye-bye 30-year mortgage? Congress considers major changes

Reality Check: Bye-bye 30-year mortgage? Congress considers major changes
Sen. Sherrod Brown, D-Ohio. File photo
Sen. Sherrod Brown, D-Ohio. File photo

(FOX19) - Fannie Mae and Freddie Mac have come a long way since their multi-billion dollar taxpayer bailouts, paying back every cent while backing 80 percent of all 30-year fixed mortgages since their government takeovers.

Now comes word that Congress is close to phasing out the mortgage giants, a decision that could keep the dream of home ownership out of reach for millions of Americans.

In fact, lawmakers are set to vote this fall on bi-partisan legislation that would shutter Fannie and Freddie in five years while creating a new agency: The Federal Mortgage Insurance Corporation, which would back up private mortgage companies that would provide most of the loans.

Sen. Sherrod Brown, D-Ohio, sits on the committee that authored the legislation. He tells FOX19 that as written, it could price millions of low and middle income Americans out of home ownership.

"I want to make sure that middle income and people have enough financial where with all to be able to purchase at least a starter house and a modest house at a modest price and that they have the ability to do that," he said.

The senator has cause for concern: Shutting down Fannie and Freddie will likely put an end to the 30-year fixed mortgage, replacing it with 10 or 15-year mortgages.

Taking a look at the current median price for a home in Cincinnati and using an online mortgage calculator factoring in today's average mortgage rate along with a 10 percent down payment, the 30-year monthly payment is $482.76. Now, taking a look at the same house with a 15-year mortgage. The payment soars to $752.76 per month, and that's with a 10 percent down payment. Some are predicting that without Fannie and Freddie as guarantors,  down payments are likely to go to 20 percent minimums across the board.

Yet another reason for sparing Fannie and Freddie: Not only have they paid back every dime of their $187 billion taxpayer bailouts, they've become cash cows for the government.

In the first quarter of this year alone, the government received $6 billion in dividends and will receive billions more this quarter. Fannie and Freddie aren't dead yet and there are reportedly a growing number of lawmakers concerned that doing away with the mortgage giants is a mistake.

But if you're saving for a house, you may want to think about buying sooner rather than later.

Related links:

The Wall Street Journal: How Much Will Mortgage Rates Rise In Fannie, Freddie Overhaul?

Marketwatch/ The Wall Street Journal: Key Democrats oppose Fannie-Freddie overhaul

Monthly mortgage calculator from

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