Is the portable mortgage a dream solution or industry time bomb?

"He stressed that the U.S. mortgage-backed securities market relies on long-term, fixed-rate loans with highly predictable performance, something portability threatens to destabilize. Portable mortgages, in addition to other issues, would totally destroy the pricing models current used by MBS's in their investor presentations, Cantrell said. The portable mortgage is also predicated on widespread lender adoption and the lender being willing to trade one asset for another."

"Cantrell says the U.S. would face similar, if not stricter, constraints. The devil is how the details are finally worked out, he said. If the same parameters are required that are used in other countries, the rest of it is up to the fees charged by the investor/lender and those are sure to be high. This concept really only works when the homeowner is buying up' since any deficiency would become immediately due or the lien would not be released on the house being sold."

"For sellers looking to move laterally or down in price, portability would offer little benefit. The borrower would need to cover any shortfall and still supply a down payment on the new property, Cantrell added. Leonard Steinberg, chief evangelist at Compass, agreed about prospective complications. Move-up buyers may have difficulty affording the additional cash for financing needed as prices have gone up in many areas since mortgage rates went up, he said."

Portable mortgages threaten the predictable performance and pricing models of U.S. mortgage-backed securities that rely on long-term fixed-rate loans. Portability depends on widespread lender adoption and lenders willing to exchange assets, and could require strict constraints similar to other countries where borrowers must remain with the same lender and complete sale-and-purchase cycles within tight windows. High investor or lender fees are likely. Portability primarily helps homeowners buying more expensive homes because any deficiency becomes immediately due and liens may not be released. Sellers moving laterally or down receive little benefit and borrowers may face higher initial rates.

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