Of the risks that are inherent in the U.S. home finance system, James Shilling, professor of real estate and urban land economics at the University of Wisconsin in Madison, said that “Fannie Mae and Freddie Mac have been behavioral scientists who can go out and measure default rates really well” based on millions of observations.
“When you look at the asset, the house, you find a long, durable asset that creates high value,” added Shilling.
Robert Van Order, chief international economist for Freddie Mac, said that there has been a 1%-2% foreclosure rate on standard 30-year, fixed-rate mortgages.
“If you want people to have good housing, you have to have the ability to take it away from them,” said Van Order, and ensure that the house is a good security, which happens to be the case in the U.S.
Soula Proxenos, director of Fannie Mae’s International Housing Finance Services Division, said that the U.S. has one of the most cost-effective home mortgage systems in the world, and “You don’t have to save for a long time to have the opportunity to be a home owner.”
In Germany, a household that wants to buy a home typically has to save with its local bank for seven years before it can get a 10-year loan on 50% or 55% of the property. Although the family gets a good interest rate, it is not as good as what its counterparts in the U.S. can obtain.
“The consumer tends to be much better off in the U.S. than consumers outside the U.S.,” said Shilling.
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