If you’re tracking the Southwest Colorado market, you know the number one conversation I’m having with clients is about the "lock-in effect." Sellers with great 3% rates don't want to move and take on a new 6.5% loan, and buyers are facing an affordability-inventory crunch.
It’s a problem built on simple math. Last week, we saw the Federal Housing Finance Agency (FHFA) publicly float two hypothetical ideas to solve it: assumable mortgages and portable mortgages.
These are not active programs for conventional loans, but they are a direct acknowledgment of the market's biggest challenge. As your real estate agent, it’s my job to look past the headlines and analyze the data—the "why" and the "what now."
Here’s the breakdown of what's being proposed and, more importantly, the significant hurdles each idea faces.
1. Assumable Mortgages
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What it is: An assumable mortgage allows a qualified buyer to take over your (the seller's) existing loan—including the original interest rate and balance.
This is a clear win for affordability. A buyer in Durango could inherit a 3.5% rate instead of qualifying for a new 6.5% loan. This would immediately bring more buyers into the market for that specific property.
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Reality Check: There are two, and they are significant.
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The Servicer Cost: Lenders (servicers) have little economic incentive here. The FHA currently caps the fee a servicer can charge to process an assumption at $1,800. Industry experts, however, estimate the actual cost to fully underwrite a new buyer is closer to $10,000. It’s simply not profitable for them.
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The Equity Gap: This is the practical issue for the buyer. If you have a $300,000 remaining loan balance but your home's current market value is $650,000, the buyer must come up with the $350,000 difference in cash. This only works for buyers with a massive down payment.
While FHA and VA loans are already assumable, bringing this to the conventional market would be complex. Until the economics work for the lenders and the equity gap is addressed, this remains a "cautious" idea at best.
2. Portable Mortgages
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What it is: A portable mortgage would allow you, the seller, to "port" your existing low-rate loan from the property you're selling to the new property you're buying.
This is the "holy grail" for the lock-in effect. It would give sellers the confidence to list their homes, knowing they can take their 3.5% rate with them. This would be the single fastest way to unlock new inventory.
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Reality Check: This is a fundamental structural problem. In the United States, a mortgage is secured by the collateral—the property itself. It's not a personal loan that just follows you around. As Matthew VanFossen, CEO of Absolute Home Mortgage Corp. noted, "So how do you lift and modify a note to another property? I don’t believe there’s an actual vehicle or mechanism... We have a mechanism for that now. It’s called paying off your current mortgage and applying for a new mortgage.". While common in Canada and the U.K., this would require a complete re-engineering of how U.S. mortgages work.
What Does This Means for You?
As FHFA Director Bill Pulte said, these are being "evaluated". These are not active policies for conventional loans, and they aren't a realistic option for most borrowers today.
So, what’s the "what now" for Southwest Colorado?
This news confirms that the government is aware of the structural affordability and inventory problem. But these are high-level discussions, not market-ready solutions.
We make our decisions based on the data we have, not the policies we might have. The market is moving, and motivated buyers and sellers are finding opportunities every day. If you’re feeling locked in, we can't wait for a hypothetical policy. We need to build a strategy for today. Let's talk.
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