- The Washington Times - Monday, June 9, 2003

Who says you can’t take it with you?

Online broker E-Trade Group Inc. announced yesterday it will begin selling a “portable” mortgage that allows borrowers to lock in current rates, which hit 40-year lows last week, and then transfer the rates to the next home they purchase.

The product, dubbed “Mortgage on the Move,” is the first of its kind in the United States, E-Trade executives and analysts said. Portable mortgages are common in other countries, including Australia and Ireland.

Candidates for portable mortgages include individuals whose employers transfer them to a new town every few years and couples who plan to move to a smaller house when their children leave home.

“For the consumer who is not certain how much longer they plan to stay in their current home and is confident rates are going to go back up, this is an attractive product,” said Robert Bernabe, chief of retail mortgage lending for E-Trade.

The Menlo Park, Calif., company, one of the nation’s top online brokerages, also offers options trading, portfolio management and online banking, and operates automated teller machines. It generated $1.9 billion in sales last year, up 6 percent from 2001.

E-Trade’s Mortgage on the Move is available only as a 30-year loan and is based on current loan amounts. Technically, if a borrower locked in a low rate today, he would have 30 years before he had to use the mortgage.

The 30-year mortgage rate nationally fell to 5.26 percent last week, its fifth consecutive record low, mortgage lender Freddie Mac reported Thursday. The 30-year averaged 5.31 percent the previous week and 6.71 percent a year earlier.

The 15-year fixed-rate mortgage averaged 4.66 percent last week, down from 4.73 percent the previous week and well below the 6.22 percent a year ago.

Mortgage on the Move will allow a borrower who finances a home at low rates to apply the terms of the loan to a new residence instead of paying off the existing loan and applying for a new loan at potentially higher rates.

A homeowner who moves to a more expensive house and needs a bigger loan to make the purchase probably would not be a good candidate for a portable mortgage, analysts said.

“It’s just common sense to me that most buyers would want to take advantage of something like this,” said John Burns, a consultant in Irvine, Calif., who has researched portable mortgages and urged the industry to adopt the concept.

Mr. Bernabe said he does not know how long E-Trade will offer the portable mortgage. A company spokeswoman said the company could drop it if demand is low or if mortgage rates begin climbing.

“It could be years or it could be months,” the spokeswoman said.

The company’s research indicates there is a strong market for portable mortgages while rates remain low, Mr. Bernabe said.

E-Trade will include the portable mortgages in its portfolio. The company has more than 4 million account holders who trade stock, primarily through the Internet.

Investors purchase most mortgages in the United States on the secondary market. A nontraditional loan such as Mortgage on the Move could not be sold, which may limit its appeal, analysts said.

“For [portable mortgages] to really take off, it’s going to have to be embraced on the secondary market,” Mr. Burns said.

Fannie Mae, the dominant player in the secondary mortgage market, has had no discussions about investing in portable mortgages, a spokesman said.

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