Edward Pinto, the co-director of the Internal Center on Housing Risk at the American Enterprise Institute, has called for the elimination of the 30-year fixed mortgage. In his article, Pinto makes a number of observations about the mortgage and explains why the current proposal penned by a group of economists that builds upon the 30-year fixed mortgage as a way of revamping Freddie Mac and Fannie Mae is not the solution the housing market needs. Pinto goes on to say that such a plan fails to take into account previous plans that have failed and in fact may lead to another housing crisis.
One of the issues Pinto has with the 30-year fixed mortgage is that it does not help homeowners build up wealth. Many homeowners with a 30-year mortgage carry that debt into their sixties, and some retire still paying on their homes.
This mortgage option also, according to Pinto, is a poor option for many potential buyers. With new home prices continuing to rise while household income stagnates, borrowers who fall into the low-to-moderate income levels may have to make a choice between taking on a large debt or watching the properties they want continue to increase in price until they can no longer afford them.
Pinto also blames the 30-year fixed mortgage as the driving force behind the housing crises of the early nineties and the more recent one in 2008.