The U.S. housing market is locked up. Homeowners sitting on 3% mortgage rates aren’t selling, even if they’ve outgrown their homes, become empty nesters, or own second properties. The result? Low inventory, rising prices, and fewer transactions.
Right now, VA and FHA loans are assumable, but with limitations. If a non-veteran assumes a VA loan, the original borrower’s veteran status stays tied to the home. Meanwhile, Fannie Mae and Freddie Mac loans—making up the bulk of the mortgage market—are not assumable.
By executive order, the president could change this. If all government-backed mortgages became assumable, the market could see an immediate boost in supply as more homeowners would have an incentive to sell. Best practice would be to allow assumptions only for owner-occupants who meet the same credit and income qualifications as the seller.
A recent poll showed 80% support for opening up the market through assumable loans, while 20% opposed the move. Some argue this would increase affordability and mobility, while others believe it could lead to higher demand, pushing prices up further.
Would assumable loans be the fix the housing market needs, or would they create more unintended consequences?