Mortgage Assumptions: The $9 Trillion Elephant in the Room
How Mortgage Assumptions Can Solve the Housing Affordability Crisis
Key Takeaways
Mortgage assumptions could unlock $9 trillion in low-rate (3%) mortgages from 2017-2021, immediately cutting monthly payments by $1,000+
Unlike zoning reforms or subsidies, assumptions directly address the core financing gap between 7% current rates and 3% locked-in rates
Implementation requires simple regulatory changes to Fannie Mae/Freddie Mac guides, not new spending
Sellers could overcome rate lock-in and fetch 5% higher prices, while buyers save $200,000+ over the loan's life
FHA and VA loans have proven assumptions work for decades, but powerful financial interests resist expanding this solution
The housing affordability crisis continues to worsen as mortgage rates hover near 7% in 2025, trapping millions of Americans in a financial prison. While politicians debate zoning reforms and down payment assistance programs, they're ignoring the $9 trillion elephant in the room: mortgage assumptions.
What Are Mortgage Assumptions?
Mortgage assumptions allow a buyer to take over a seller's existing mortgage with its original interest rate, term, and remaining balance. This simple mechanism could immediately unlock millions of low-rate mortgages that originated between 2017-2021, when rates were around 3%.
Currently, only FHA and VA loans are widely assumable. Conventional loans backed by Fannie Mae and Freddie Mac—which represent the majority of U.S. mortgages—generally prohibit assumptions. This arbitrary restriction is preventing a market-based solution to the affordability crisis.
The $9 Trillion Opportunity
Between 2017 and 2021, approximately $9 trillion in mortgages originated at historically low interest rates, averaging around 3%. These mortgages represent an enormous pool of affordable financing that's currently locked away from the market.
The math is compelling:
A $400,000 mortgage at 3% costs about $1,686 monthly
The same mortgage at 7% costs about $2,661 monthly
Assumption saves buyers $975 monthly and over $200,000 over the loan's life
This isn't just theoretical. FHA and VA loans have allowed assumptions for decades, proving the concept works. The barrier isn't technical feasibility but regulatory permission.
Win-Win for Buyers and Sellers
The beauty of mortgage assumptions is that they benefit both sides of the transaction:
For buyers:
Immediate monthly savings of $1,000+ compared to current market rates
No need to qualify for today's higher rates
Total savings exceeding $200,000 over the life of the loan
Lower down payment requirements in many cases
For sellers:
Escape from rate lock-in that's keeping them from moving
Ability to command 5% higher sale prices due to the valuable low-rate mortgage
Larger pool of qualified buyers who can afford the property
Faster sales in a market where listings often stagnate
There is no other solution that has no inflationary cost to the economy and can help to restore housing affordability across the US overnight.
Implementation Is Straightforward
Enabling widespread mortgage assumptions requires no new government programs or spending—just regulatory permission to amend Fannie Mae and Freddie Mac servicer guides to allow assumptions for 2017-2021 conventional mortgages
There are private platforms that already exist and can help to connect assumption-eligible sellers with interested buyers. These changes could be implemented within months, not years, providing immediate relief to the housing market.
Why Policymakers Resist
Despite the clear benefits, powerful political interests stand in the way of widespread mortgage assumptions:
Banks profit from higher-rate new originations rather than transferring existing low-rate loans
Investors in mortgage-backed securities fear disruption to expected returns
Regulatory inertia and risk aversion slow the adoption of even proven solutions
The resistance isn't about technical feasibility—it's about protecting entrenched financial interests at the expense of ordinary Americans.
The Anti-Inflationary Solution
Unlike many housing affordability proposals, mortgage assumptions are inherently anti-inflationary. They don't create new money or increase purchasing power across the market—they simply allow the transfer of existing financing from one homeowner to another.
This stands in stark contrast to down payment assistance programs or tax credits, which pump more money into an already supply-constrained market, potentially driving prices even higher.
Time for Action
The housing affordability crisis demands immediate, effective solutions. Mortgage assumptions represent the most direct path to making homeownership accessible again for millions of Americans.
By allowing the transfer of existing low-rate mortgages, policymakers could:
Make homeownership immediately affordable for up to 30 million families
Break the rate lock-in effect, trapping current homeowners, and allow them to enter the market
Revitalize a stagnant housing market without inflationary side effects
Demonstrate that market-based solutions can address affordability challenges
The $9 trillion in low-rate mortgages exists today. The only question is whether policymakers will allow Americans to access this enormous pool of affordable financing or continue to protect the profits of financial intermediaries at the expense of ordinary families.
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