Fact Check Team: Will Trump's 50-year mortgage idea solve or worsen housing affordability?

WASHINGTON (TNND) — The Federal Reserve signaled this week that aspiring home buyers expecting more interest-rate relief may have to keep waiting. And that delay is exposing a deeper problem in the housing market: hundreds of thousands of Americans who bought newly built homes over the last few years are already underwater on their mortgages.

It’s a trend analysts say didn’t happen by accident, and the lending practices behind it mirror warning signs from the early 2000s.

How Builders Helped Create a Wave of Underwater Mortgages

Being “underwater” on a mortgage simply means you owe more than your home is currently worth. As Bankrate’s chief financial analyst Greg McBride explains, “you owe more than the current value the asset is worth less than the amount you borrowed”.

But according to a new analysis first reported by The Wall Street Journal, many homeowners who purchased newly built houses in 2022–2024 landed in that position almost immediately. That’s because large homebuilders have been offering artificially low mortgage rates, often far below market levels — in exchange for higher home prices.

Here’s what WSJ found, based on data from analyst John Comiskey:

• 27% of Lennar’s FHA loans from 2022–2024 are now underwater.
• 18% of D.R. Horton’s FHA loans are underwater.
• 10% of Quicken Loans’ FHA loans (a non-builder lender) are underwater.

The playbook works like this: builders advertise mortgage rates around 3.99%, even while the broader market hovered closer to 6.3%. But to make the numbers work, they keep sale prices above what the property might otherwise be worth. Buyers get a lower monthly payment, but at the cost of taking out a loan that’s already near, or above, the home’s actual value.

When prices stopped rising, many borrowers slid into negative equity almost immediately.

What Happens When You’re Underwater?

For homeowners, the consequences are severe, and in some cases, financially immobilizing.

1. You can’t easily sell your home. Selling requires bringing cash to the closing table to cover the gap between the loan balance and the sale price. That can mean writing a check for tens of thousands of dollars.
2. You can’t refinance. Lenders require equity to approve a refi. Without it, homeowners are effectively locked into their existing rates.
3. The risk of default rises. When people owe far more than their home is worth, they’re more likely to walk away, a dynamic that played a major role in the 2008 housing crash, according to Bankrate.
4. It becomes a systemic risk. Large pockets of underwater loans strain lenders, federal backstops, and local housing markets.

In short, underwater mortgages trap households and can reverberate far beyond a single borrower.

Is a 50-Year Mortgage a Solution, or Another Risk?

Into this climate stepped former President Donald Trump, who floated a new idea on Truth Social: 50-year mortgages.

Supporters call it an affordability boost. Critics are calling it a “lifetime mortgage.”

The Upside: Lower Payments

A 50-year mortgage would spread repayment over two extra decades, meaning lower monthly payments.

A New York Times analysis found that on a $500,000 home, a borrower could save about $250–$300 a month, around $4,000 a year, with a 50-year loan versus a standard 30-year mortgage.

Lower payments could help more people qualify, especially first-time buyers who fail debt-to-income checks.

The Downsides: Higher Costs and Bigger Risks

There would be enormous lifetime interest. Using the same NYT example:

• 30-year mortgage interest: ~$500,000
• 50-year mortgage interest: nearly $900,000

You’d pay almost twice the price of the home in interest alone.

The National Association of Realtors says the median age of a first-time buyer used to be 36 but is now 40. Add 50 years and they’d be 86 by the time the loan matures.

The Bottom Line

Builder-backed mortgages helped more Americans buy homes in a tough market, but often at the cost of pushing them into inflated prices and negative equity. Now, with underwater mortgages spreading across multiple major homebuilders, policymakers are starting to ask whether the industry’s lending incentives need a closer look.

Meanwhile, Trump’s 50-year mortgage proposal aims to boost affordability but could introduce new long-term risks: massive interest payments, slower equity, and more households vulnerable to downturns.