Portable mortgage plan faces hurdles in Congress

Homeowners generally cannot carry an older, lower-rate loan into their next home. A proposal before Congress would let both the debt and its interest rate follow the borrower to a replacement property. Supporters believe that flexibility could encourage owners to sell despite today’s costlier financing. Economists caution that the change could make new mortgages more expensive.

A buyer moving into a pricier property would still need cash or another loan for the gap. The broader challenge involves how American mortgages are financed. Investors purchase bundles of loans whose values reflect the homes securing them and the expectation that a sale will trigger repayment. Portability would separate a loan from its original collateral and alter that payoff schedule. Realtor.com senior economist Jake Krimmel said investors might charge more for the added uncertainty, potentially lifting rates.

New Jersey Republican Thomas Kean filed the MOVE Act in June. It would instruct Fannie Mae and Freddie Mac to purchase loans with portable terms. The measure has no co-sponsors and remains in committee. Lawmakers raised feasibility concerns during a February hearing, where a Cato Institute expert said changing mortgages already sold to investors would breach their contracts. Canada and the U.K. permit portability under systems featuring shorter loan periods, periodic rate changes and early-payment penalties. Their banks also hold more mortgages rather than packaging them for investors.