The case for a 40-year mortgage

The 30-year mortgage has been the American standard for decades, offering affordable monthly payments with a reasonable repayment period. However, as housing prices soar and interest rates rise, especially in urban areas, even 30-year mortgages can leave many families in trouble with unaffordable payments. A 40-year mortgage would lower monthly payments through a longer repayment period and potentially lock in an affordable market rate, making homeownership accessible to a wider segment of the population.

The 30-year mortgage term is not magic—it was created during the Great Depression, when life expectancy was also around 60. Today, when life expectancy is approaching 80, a 40-year term better reflects modern realities.

Critics may argue that a longer mortgage term increases overall interest rates, but the benefits of affordability and access outweigh this disadvantage. For many, the alternative is a perpetual rental that builds no equity and leaves families vulnerable to rising rents and economic displacement. A 40-year mortgage allows more people to start building equity sooner and provides a path to long-term financial stability and continued human dignity – a key element of the American dream. A path up America's repaired economic ladder of advancement.

The FHLB system, a government-sponsored enterprise that provides liquidity to member financial institutions, is the ideal vehicle to implement this 40-year mortgage plan. By leveraging FHLB's established infrastructure and network of regional banks, this program can be efficiently rolled out nationwide. FHLB's involvement ensures that the program is based on a robust, government-supported framework that promotes housing market stability and provides tailored solutions to meet the diverse needs of communities, from rural areas to large urban markets.

To further support first-time homebuyers, I propose federal subsidies for mortgage rates between 3.5% and 4.5% for those who complete certified financial literacy training. Subsidies would be capped at $350,000 for mortgages in rural areas and $1 million in urban markets, which takes into account the varying costs of homeownership across the country.

Financial literacy training gives first-time buyers the skills they need to effectively manage their finances, avoid loan fraud, and make informed decisions about purchasing a home. By pairing this training with subsidies, we encourage responsible borrowing and invest in the financial health of future generations.

The benefits of this proposal extend beyond individual homeowners. Expanded access to homeownership creates a ripple effect that boosts the overall economy. Homeownership drives consumer spending as new homeowners invest in furniture, appliances, home improvements, and other goods and services, creating jobs and contributing to GDP growth.

In addition, homeownership promotes community stability. Homeowners are more likely to invest in their neighborhoods, resulting in safer, more vibrant communities, which in turn attracts businesses, increases property values, and creates a positive feedback loop that benefits everyone. Neighborhoods with higher homeownership rates also tend to have higher average credit scores, which stabilizes the community, lowers crime, and promotes families.

A 40-year mortgage program can also address America's growing wealth gap. Homeownership has historically been one of the most effective ways for families to build wealth. By making homeownership more accessible, especially for young people, minorities, and people in rural areas, we can promote a more equitable distribution of wealth and help close the economic divide. This approach also addresses social justice issues, particularly for historically marginalized communities like African Americans, where the homeownership rate is 45%, compared to 75% for white Americans. Bridging the homeownership gap can help close the wealth gap and advance social justice from an economic perspective.

This proposal is not just about increasing homeownership; it is also about promoting sustainable economic growth. By enabling more Americans to own a home, we are laying the foundation for a more stable economy. Homeowners are more likely to save, invest in their communities, and contribute to economic stability.

Furthermore, this approach is consistent with broader economic sustainability goals. By focusing on financial literacy and responsible lending, we can avoid past pitfalls such as the 2008 housing crisis and build a housing market that is inclusive, stable and growth-oriented.

The introduction of a 40-year mortgage, backed by the FHLB system and bolstered by federal grants tied to financial literacy, is a powerful tool for expanding homeownership in America. This approach provides a sustainable path to economic growth, community development, and wealth creation. By making homeownership more accessible, we can ensure that the American Dream remains attainable for generations to come, driving prosperity and stability in our economy.

Now is the time to act boldly. By rethinking our approach to homeownership, we can build a stronger, more inclusive, and more resilient American economy. Let's seize this opportunity to make homeownership possible for all Americans and recognize financial literacy as a civil rights issue for this and future generations – a win for all Americans.

— John Hope Bryant is an entrepreneur and founder and CEO of Operation HOPE, a nonprofit financial literacy provider. He is a member of the CNBC Global Financial Wellness Advisory Board and the CNBC CEO Council.

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