CHICAGO, Oct. 11 (UPI) -- U.S. credit unions are testing a 40-year mortgage in partnership with Fannie Mae, the Chicago Tribune reported Monday.
Although a few commercial banks offer the long mortgage, Fannie Mae's involvement in the test being conducted nationally by 16 credit unions could ensure that the product becomes standard fare in the mortgage lending business.
The long-term effect, however, could be negative for consumers.
Robert Manning, a professor of finance at the Rochester Institute of Technology, said Fannie Mae's bid to expand homeownership could end up putting more cash into the hands of first-time buyers, thus driving up interest rates even as monthly payments are less.
"You are bringing more people into the market who should not be there," Manning said.
"It makes it more unaffordable for those who want to do the right thing and save for a down payment and get a mortgage that's a realistic length."
