Information provided by the Homeownership Alliance
WASHINGTON, DC - In a white paper released by the Alliance last year, Stuart Gabrielcolor> wrote, "The fixed-rate mortgage is the cornerstone of the U.S. housing finance system, putting millions on the path to wealth." Gabriel, director of the University of Southern California Lusk Center for Real Estatecolor>, explained in the Alliance white paper entitled Mortgage Finance Innovation and the Achievement of Homeownership: The Role of the Fixed-Rate Mortgage how the fixed-rate mortgage continues to hold sway over adjustable rate mortgages.
"Arguably among the most profound of U.S. mortgage innovations came long ago with the introduction of the level-payment fixed-rate mortgage in the 1930s. That instrument has become a cornerstone of the highly articulated U.S. housing finance system. Further, the introduction of the long-term, level-payment mortgages, together with standardization in underwriting and active secondary market trading thereof, has resulted in substantial homeownership gains among U.S. households," Gabriel said.
"The substantially longer term of the fixed-rate mortgage enabled a lower monthly payment, in turn facilitating lower payments-to-income ratios and hence higher levels of housing affordability among moderate-income homebuyers," Gabriel said.