Weekly Real Estate News
A new bill that would enable homeowners to transfer their existing mortgage to a new home has been introduced in Congress.
Rep. Tom Kean Jr. (R-NJ) has put forth the Making Ownership Viable for Everyone (MOVE) Act, which would allow homeowners to transfer their existing mortgage rate, term, and balance to a new property. The MOVE Act would also require Fannie Mae and Freddie Mac to begin purchasing portable mortgages.
The subject of portable mortgages was briefly raised last fall by Federal Housing Finance Agency Director Bill Pulte as a potential tool for the Trump administration to combat affordable homeownership challenges. However, the administration never went forward with the idea.
“Homeownership is one of the most important ways New Jersey families build equity, stability, and long-term financial security,” said Kean. “I have heard directly from residents across our state who feel stuck in homes that no longer meet their needs because moving would mean giving up their mortgage rate. I wrote this bill, the MOVE Act, to give homeowners more freedom, help put more homes on the market, and make the American Dream of owning a home more attainable for families across New Jersey.”
This is the second bill introduced by Kean since return to Congress after an unexplained absence from March 5 to June 30. Upon his return, he stated he was away from Washington to receive treatment for depression.
I have no idea how this could work. Let’s say I have a $300k outstanding balance on a property I’m selling that’s worth $500k. I sell that home for $500k, and now I want to buy a new home for $700k. From where does the $700k that the new home’s seller requires to transfer the deed to me come? True, I have $500k from the sale of my property to give him or her, but that doesn’t cover the $700k sales price. So if I give that $500k to the seller, will my old mortgage that’s transfered now be $500k ($300k original balance still owed + $200k new money)? And what if I can’t afford the payment on a $500k mortgage balance because the payment would absolutely have to increase to cover the added debt in order for the loan to amortize? I have no idea how this could work. Assumptions (that already exist for certain types of loans) allow a buyer to assume the seller’s mortgage as is (as long as he or she qualifies) by paying the seller the difference between the mortgage balance assumed and the property’s value. But the buyer’s previous mortgage is paid off when the assumer (buyer) sells his or her previous home.
I don’t know the formula being considered to make this happen, but it makes perfect sense to me if:
When you sell your home for 500K, and you still owe 200K, your buyer pays you and the bank. The bank can then erase that debt that’s paid, and hold that 200K in a specific new home account tied to the new home being purchased, and then go through the lenders process of approving the balance of a new loan, if needed. Underwriters would still get an appraisal and do their due diligence.
The bank would create a 2nd for any balance paid over 200K at market rates, if needed. When the loan is approved and the loan closes on the 700K new home, the bank transfers the funds, the same as always, and the Buyer has two essentially two loans to pay on the new home, one for 200K at the same interest rate that was always paid, and the new 2nd at the new rate.
I’m thinking in most cases people want to downsize. So the idea works better if someone is moving and gets paid for their home, then move to a less expensive place. It also works better if someone has been saving and can afford to pay the difference for the new home, and just keep the terms of their old loan moving forward with a new property.
Wasn’t the main purpose behind the California Lottery to fund schools? What happened to all THAT money?
This is the best idea I have heard from a GOP legislator is decades. This will be a game changer in the housing/residential real estate market. I hope it passes. My guess is that it’s not going anywhere. The big banks and financial institutions will kill it. How dare you try to make life affordable for the ordinary citizens.
What happens when you want to take a $300,000 mortgage to a $750,000 house? Should the bank be forced to give you that 3% rate even though their exposure is now more than doubled? Republicans are practicing socialism and they don’t even know it.
They should be required to give the old rate on the same amount that was paid off and create a new second for the balance. Republicans are not practicing socialism. Some people are looking for ways to move the market that benefits everyone. That’s not socialism, that is good policy.
How interesting!!!! Would this change the options for an older couple who wants to sell but has a lower than current interest rate they don’t want to use? My theory example: A portable mortgage might be used in a sale and purchase for a couple that can sell for $900,000, with a $280,000 mortgage balance at 5% interest, and the same couple wants to buy a $600,000 home elsewhere: Does this make sense?
A true portable mortgage would let the couple move the remaining $280,000 balance—not the original loan amount—from the current home to the $600,000 replacement home, preserving their 5% rate and remaining amortization term.
Mechanically, the lender would release its lien on the $900,000 home and replace it with a lien on the $600,000 home. The buyers would bring $320,000 of their sale proceeds to the purchase; the $280,000 carried loan supplies the rest of the purchase price.
Their new first-mortgage loan-to-value would be:
$280,000÷$600,000=46.67% LTV
$280,000÷$600,000=46.67% LTV
That is a very conservative collateral position. They would still retain approximately $300,000, before broker commissions, seller concessions, transfer taxes, payoff/settlement charges, and the buyer’s closing/pre-paids.
Underwriting view
Even under a future Fannie/Freddie portable-loan program, I would expect the lender to require:
A new appraisal supporting the $600,000 value and confirmation that the new home is acceptable collateral.
Re-underwriting of credit, verified income/assets, debt-to-income ratio, occupancy, insurance, title, and any state-specific property requirements.
A coordinated closing—often same-day or inside a short permitted window—so the lien can move from the sold home to the replacement home.
Payment of all transaction costs and any required reserves from the couple’s available cash.
Continued qualification based on the existing $280,000 loan payment, taxes, insurance, HOA dues if applicable, and their other debts.
Importantly, this is not an assumption. With an assumption, the buyer of the $900,000 home takes over the sellers’ mortgage. With portability, the same couple retains the $280,000 debt and changes the collateral from their old home to the new one.
Practical results
The couple would not need a new $600,000 mortgage—or even a new $280,000 mortgage—if portability were permitted. They would keep their 5% loan on the remaining $280,000 balance, use $320,000 of equity as their down payment, and have roughly $300,000 in gross proceeds remaining for closing costs, reserves, moving, investments, or other purposes.
1) The seller moves, two homes are sold and bought – money moves and the people move.
2) Seller retains more of their equity.
3) There are more dollars put into the economy with the seller’s resulting cash position.
Currently, under today’s standard conventional Fannie Mae/Freddie Mac framework, the actual transaction is instead:
sell for $900,000,
pay off the $280,000 loan at closing,
receive about $620,000 before costs,
then purchase the $600,000 home—potentially all cash,
leaving roughly $20,000 before costs, or with a smaller new mortgage if they prefer liquidity.
Fannie Mae’s current guidance also treats a pending sale and a new principal-residence purchase as separate underwriting matters, requiring evidence of the sale and cleared financing contingencies to exclude the old housing payment in qualifying.
I think the idea is interesting!!!
Heath Coker thx for your breakdown explanation. Recently had a senior relative wishing he could buy a home similarly priced as his current home & get same interest rate? Like many srs, he’s not selling/moving bcuz he doesn’t want to lose his 3% int rate.
Thank you for this, Heath! The market will not move as long as banking doesn’t move.
No loan program is a perfect fit for everyone. Sounds good for downsizing, Not so good for upsizing.
Old balance carried forward $1 @3%
New additional balance $1 @ 6%
Total new balance $2 with two different percentages and end dates of their own balance portion.
Like having a mortgage and a HELOC payment all in one. They both have two different balances and interest rates being paid on with two different time frames to finish paying them off.
If you owe 1 dollar at 3% and now you want to transfer that $1 to a new property that you’re paying $2 for. All it should be is, the new mortgage has 2 different interest rates. 3% on the Carrie’s forward $1 and what ever the new interest rate is on the other 1$. Ideally, for the consumer, it would be great if the new 30 year (or what ever amount of years) mortgage would have the 3% interest rate for the life of the loan on that 1$. Even better 3% on the entire new 2$ loan. Realistically, it’s not right for the banks to now give someone a new total loan at your old interest rate.
Now give you a new loan on a new property with the same balance amount and interest rate carried forward to the new total amount, that makes 100 percent good sense to me. I don’t see it as overly complicated.
Move the old portion to the new property at the old interest and the additional cost at current interest.
The bigger questions are, will that old $1 carried forward now have a new 30 year term or just the same time left as the old loan? The easier thing to do and beneficial to the consumer would be to just extend the old $1 balance to the new loan term of 30 years. But of course, this is not “fair” to the lender. So now we have one loan with two different interest rates and loan time frames.
At the end, the consumer gets to keep the old loan percentage for a good amount of time, which equals to savings over all in the total new purchase loan.