I’d say also some sort of income-based automatic loan guarantee. Let’s say you make $5000 per month. Using the 30% rule you automatically qualify for a mortgage requiring no more than $1500 per month including taxes and insurance. The issue in 2008 was not so much subprime loans as it was people getting mortgages they could not afford - whether prime or subprime borrowers.
Probably not. A lot of people have savings accounts paying more than the mortgage is costing them. They’d lose money paying it off, and that’s just a bank account. Consider stocks and bonds. Why bail out a bank from its terribly priced deal?
Well yes, but ironically, the chief reason it builds wealth is the leverage a mortgage provides. You can buy a $500,000 asset with only $100k out of your own pocket. Then by the time it doubles, you have $1,000,000 instead of $200,000. Without the mortgage, people would lack the ability to cheaply lever up, meaning the only people who could make money were people who already had money…the rich people.
Who ever wants to keep the house? My dad got a 40 year loan at 73, not sure what the problem is. House is worth double what he paid in 2020 today, we obviously will keep paying the loan when he passes. It’s not being left “holding the bag” so to speak.
The solution is to add more moderately-priced housing supply. The home-building industry has moved away from that, in favor of building bigger/more expensive homes – the median selling price of a newly-built home in the U.S. is now $416,000, about double what it was 15 years ago (source). Adding to the problem is that, in recent years, many existing smaller single-family homes have been bought up by companies and investors, flipping them into rental properties and taking them off the market for actual homeowners (source).
As a result:
Source:
Banks offer 30 year fixed rates because the federal government incentivizes them to. I think most people in this thread have it backwards - long-term fixed rate loans are insanely friendly to the recipient of the loan. The market doesn’t offer 50 year mortgages because they would have to have much higher rates compared to the 30 years that are offered now, and if the government incentives stopped those would have to have higher rates as well.
Within a 30 year period, interest rate are nearly guaranteed to fluctuate. If they’re ever below 4%, the homeowner can refinance and sit at that 4% rate for the next 30 years, and during most of it have a minority stake in the house itself, freeing up their cash to put in an investment portfolio that is both safer and has higher returns than 4%.
That’s why nearly everyone in America gets the (accurate) advice that if the bank will approve you for a mortgage and you have enough income/assets to have something left over for a rainy day, you should buy a home.
On an individual level, that’s great. However it’s had the side effect of inflating housing prices and in turn crushing upward mobility in America. Families that have enough generational wealth to be invested in this can continue to benefit from housing values going up with very little risk. Individuals and families that can’t afford that initial down payment face higher and higher rent without getting the benefits of this wealth-creating sorcery. On top of that, it makes people view their home as an investment and put regulatory burden on increasing the housing supply, which is the real way to address housing costs.
Putting enough incentives to make the 50 year mortgage the new 30 year mortgage would be just fine for the banks - they’d happily have the government float them money for any otherwise questionable investment. However it would only increase all of these issues, not to mention increase the likelihood of another housing bubble.
I don’t know that we can assume that. The 30 year rate is tied to the 10-year Treasury for a reason. People don’t live in their homes for 30 years. If they don’t live there for 30, how could they live there for 50? It may come to pass that the 30 year and the 50 year are essentially the same rate because the homeowner’s profile doesn’t differ.
This thread has a bad case of presentism. People keep talking about 4% mortgages or 3% or even 2%.
My first mortgage was 21%. Because we couldn’t see the future, my wife and I bought our first house in 1981, which was the peak. The stagflation of the 70s forced mortgage rates up and up.
That probably won’t happen again. With a big caveat that if Trump keeps pushing his tax, I mean tariffs, policies and cuts off imports of vital goods, the country could see an economic collapse. What happens then? Does house buying essentially cease as in the Depression? Or do mortgages extend to keep monthly payments as low as possible?
We need to look past the number 50 to speculate how the Trump mortgages would work. Would they be fixed or variable rates? Interest only with a big balloon payment (in presumably depreciated dollars) at the end? Would they allow for paying off early without selling? Who covers the costs of foreclosures? What if properties sit vacant for decades because they can’t be rebought?
Trump hasn’t given out any details; the likelihood is 112% that he hasn’t any. This is teasing the public like the $2000 check. Any good fortune anyone has today is irrelevant to tomorrow. And bad times can reverse. The future is hard.
If you pick any point from 0 to 30 years, the total the homeowner has paid off the principal is less in a 50 year than a 30 year. As a result, the bank has more money tied up in someone else’s house, which at times means they have money tied up in a 3% mortgage when the government could just give them 4% on a treasury bond (as is the case now). To make that work with a 50 year, they’re either going to raise interest rates so that the monthly payment savings are diminished, or they’re going to get enough of a subsidy to offer the interest rates people expect (which are about 2-3% above long-term treasury bonds), and that subsidy is going to inflate the value of homes themselves.
ETA: Not to mention, they wouldn’t be offering the kind of rates they offer for 30 year mortgages in the first place if it wasn’t for the federal government.
You are surprisingly optimistic in this estimate of the likelihood
There was another thread started about this but I will repeat my concerns here as well.
How do you prevent investors looking for rental income from buying up all of those houses?
How would you ensure people with a credit score of under 640, but can afford house payments, would get approved by lenders?
My understanding is that Trump posted the idea to Truth Social within minutes of Bill Pulte showing him a big presentation board that featured it, and which described Trump as a “Great American President.” So, yeah, Trump had/has no details whatsoever.
I understand all that. I’m merely pointing out that it’s a speculative assumption. Yield curves invert from time to time. It’s a market. The rate will fluctuate to the point where people will buy it. If people don’t see the benefit of 50, then the rate will come down. We might see a .5% or even a .25% spread. Maybe. Perhaps.
If and only if it’s used responsibly, and only if housing prices rise. Having leverage is good. 50 years of debt peonage is bad.
It’s “good debt” if the interest rate makes sense and if it serves your financial goals. Many people go into home indebtedness with no more forethought than “I have to be a homeowner or I’m giving all my money to the bank”. Sometimes it doesn’t make sense, some forms of home indebtedness are really ill-considered.
But I realize I said “home indebtedness is bad” when what I really meant is policies increasing home indebtedness generally shouldn’t be encouraged, and specifically not as a way to alleviate the housing crisis. This is inarguably true. Increasing demand without increasing supply will artificially spike prices, which supposedly is the opposite of what we want.
If I had any idea why you’re throwing 401k’s into a thread about housing indebtedness, I would observe that not everybody is privileged enough to have a 401k.
Well, his point is that for many middle-class people taking a longer mortgage at market rates and then investing the difference in payments between that and a shorter mortgage is a wise financial decision (assuming certain values for market growth and the gap between the mortgage rates). Doesn’t have to be a 401k; an IRA does the same thing. You are trading out increased home equity for increased equity in stocks and bonds. From a liquidity perspective the latter is much better.
I happen to think that his assumption for market growth (10%) is probably a bit high (I use a 5-7% range for my personal modeling).
I also think that the “break-even” gap indicated in his post (0.625%) is very unlikely to be the reality even if the government declares 50-year mortgages to be conforming and insurable. It would also potentially add quite a lot of risk to Fannie Mae and Freddie Mac.
It’s actually a bit weird to hear a supposedly conservative President talk about increasing government intervention in the housing market. I’m more used to the GOP talk about getting Fannie and Freddie out of the market altogether.
ETA: This part is undoubtedly true.
He says what he thinks will (a) appeal to his base, (b) what he thinks will generate media buzz, and (c) what he thinks will make him look like a genius. And it’s not the first idea he’s proposed during this term which feels more like heavy-handed government intervention in the free market, than anything that an alleged “conservative” president would propose.
Maybe I am missing something, so I will ask if this is correct: There is no government incentive for banks and mortgage companies to offer non-conforming/jumbo 30 year loans, and yet they mostly do.
If correct, the reason they offer 30 years loans is because there are 30 year Treasury bonds. This enables them to know what interest rate to charge the borrower. A few banks offer 40 year loans, but these are mostly balloon loans where the risk of what happens after year 30 is put on the borrower.
I’m now thinking that banks, no matter how Trumpy the management, will be reluctant to write 50 year fixed rate jumbo/nonconforming mortgages due to not knowing what interest rate to charge.
Only if the Trump administration forces Fannie Mae and/or Freddie Mac to buy hard-to-price extra-long mortgages will the banks offer them. Then will the risk go on the government?
Except our society in general (based on this thread, most of us are probably outliers) people DON’T invest cash wisely, they spend it on what they might need at the moment, what is fun, or the ever-losing battle with having nice/big/luxurious cars in a never ending stream of payments. And then, say, 35-45ish or so, they realize they may NOT have enough for late-life medical payments and retirement.
I do not dispute your point - if you’re disciplined and money savvy, you can absolutely put that money into investments, even pretty secure investments, and have a nice chunk of cash at the end. Even so, for the housing market of the last decade or so, a house is/can be a solid make it and forget it investment.
You’re not wrong for you, of course, But sometimes the person inheriting the the loan may NOT be in a position to continue to make the payments. They may not have the free assets to pay an additional monthly payment on top of one they are likely already paying on their own property or rent. As well as another set of insurance, upkeep expenses, and/or the time to keep the property maintained.
Of course, you can offset that by renting the property - but then you have to put up with all the stresses of being a landlord (we have plenty of horror stories on this board) or paying someone to manage this for you. It’s not undoable by any means, but it may, especially in the short term after a family member’s death and related expenses, be too much, too fast.
Right back to the whole “bad idea” in the first place, it’s very much an option I think you should go into with open eyes both for yourself and your heirs. PPPPPP (Prior Planning Prevents Piss-Poor Performance), at least, ideally. 
And once again, the people who choose to congregate on the SDMB heavily lean towards those that (absent an uncontrollable crisis) DO that sort of planning and research. People who I see constantly on adds for Carvana and the like, who are entirely taken with “setting their own downpayment and monthly fee” and not caring about the interest rate or length of their loan… well, I again doubt we’re the ones in the majority.
If the house doesn’t have any equity and they are upside down on the loan they simply do not have to take it, and if the house does have equity they can just sell and pocket the difference.
Heck, based on 25 years of experience on this board, I would say that most of us at least claim to be far smarter with our money than the average person. We also, as a group, claim to be smart shoppers in general, read labels, and are not influenced by advertising. 
Well if we’re going to delve into the realm of poor money decisions and undisciplined actions from fools, then I think we have a lot more to fear from payday loans, QVC, used car dealerships, and MLM scammers than a mortgage broker peddling 50 year loans. If you are going to use poor skills as the reason not to do something, then you can call pretty much anything a bad idea.
Well that’s always the thing, right? “I’m smart enough to figure this out, everyone in this room right now is a savvy investor, but everyone who can’t hear me right now is dumber than me and worse at everything. They should be protected from foolish choices that I, of course, am wise enough to resist but the common man is not.”