The Wall Street Journal
by Nick Timiraos
Mortgage rates could rise by as much as 1.5 percentage points for homeowners with weaker credit or smaller down payments under various legislative proposals to overhaul Fannie MaeFNMA +5.58% and Freddie MacFMCC +5.84%, according to a study prepared for an industry group.
The study, by Kent Colton and Michael Carliner of the Harvard Joint Center for Housing Studies, was produced for the Leading Builders of America, a trade group representing large U.S. home builders. The study found that earlier estimates of mortgage-rate increases from an overhaul of the mortgage-finance giants understate the potential impact to average American borrowers.
“We wanted to make sure people knew that there’s a range of potential costs. It’s not just the ‘best-case scenario’ cost,” said Ken Gear, executive director of the trade group. Mr. Colton is a former chief executive of the National Association of Home Builders.
The Colton-Carliner paper examined the potential cost to borrowers under the housing-finance overhaul envisioned in a bill introduced last year by Sens. Bob Corker (R., Tenn.) and Mark Warner (D., Va.). They estimate that rates could rise between 0.25 and 1.5 percentage points as a result of higher capital requirements and other fees imposed by the overhaul.
