Andy Hart in American Banker: Is Portability the Cure to the Mortgage Market’s Woes?

Dec 11, 2023 | News/Media

Amidst a mortgage lending slowdown due to rising interest rates, industry insiders are exploring ways to rejuvenate the market. Some propose taking cues from Canada and other advanced economies, advocating for the adoption of mortgage portability. This policy, already prevalent in Canada, Australia, the United Kingdom and other nations, could enable borrowers to seamlessly carry their mortgage terms, interest rates and even entire loans when moving from one property to another or to transfer their existing favorable mortgage terms to the next homeowner. To learn more about this potential cure to the mortgage market’s woes, American Banker turned to Andy Hart, chief executive officer of Delegate Advisors, for insight.

According to Hart, introducing mortgage portability to the U.S. would empower homeowners to break free from their “golden handcuffs,” alleviating financial constraints associated with a new mortgage, even amid ongoing property value appreciation. “That low-cost mortgage transforms into low-cost housing for the remaining term of the mortgage,” he explains. “It’s as if, all of a sudden, you’ve turned your biggest liability into your biggest asset.”

While mortgage portability holds potential benefits for current homeowners and the overall for-sale housing sector, opponents argue that its adoption may introduce more issues than it aims to resolve, particularly concerning interest rates and duration. Nonetheless, Hart remains optimistic, stating that these risks are unlikely to pose significant threats as long as the process is executed accurately.

“Whether it’s a five-year mortgage or whether it’s a 30-year mortgage, you’re still doing the same job from an interest rate risk management perspective,” says Hart. “Duration of the instrument doesn’t matter to me, you should be understanding that the price volatility and sensitivity of your earnings to a change in interest rates is higher when the duration is longer.”

Hart outlines the next steps, stating that the move to mortgage portability necessitates initiation by Congress and execution by federal regulators. By drawing parallels to historical precedents, such as the reforms made after the Savings and Loan Crisis of the 1980s and ’90s, which liquidated commercial loans on bank balance sheets and paved the way for the senior secured loan market, he believes that implementing similar policies is politically feasible. This is due to the positive impact it could have on consumers and the broader economy.

“Who wouldn’t want to go into the ’24 election saying, ‘Hey, by the way, I voted to give you low-cost housing for the next 20 to 30 years, thank you very much,'” says Hart.

Subscribers to American Banker can read the entire article here. If you are interested in learning more about mortgage portability, please do not hesitate to contact us