We Already Know How to Make Mortgages Portable

Here is a number that should bother you: 1.33 million.

That is how many home sales did not happen between mid-2022 and the end of 2023, according to research from the Federal Housing Finance Agency. Not because people did not want to move. Not because there were no buyers. Because homeowners looked at their 2.8% mortgage rate, looked at the 6.5% rate they would get on a new loan, and decided to stay put.

And that was just 18 months of data. The problem has only gotten worse since.

The Lock-In Effect Is a Structural Market Failure

Right now, nearly 80% of American homeowners with a mortgage are sitting on rates below 6%. About one in five have rates below 3%. These are people who locked in during the pandemic era, and for most of them, selling their current home would mean doubling their monthly payment on the next one. Same income. Same family. Same life. Double the housing cost.

So they stay.

The FHFA found that for every single percentage point that current market rates exceed a homeowner’s existing rate, the probability of selling drops by 18.1%. Think about that. If you are at 2.8% and the market is at 6.8%, that is a four-point gap. Your probability of selling has been cut by more than 70%.

A recent Bankrate survey found that 54% of homeowners said there is no mortgage rate at which they would be comfortable selling. Not 7%. Not 5%. No rate. That number was up 12 points from the year before.

Home sales are tracking at levels we have not seen since the 2009 crash. Not because the economy is collapsing. Because people are mathematically trapped in their current homes.

And here is the part that really matters: that supply shortage is actually pushing prices UP. The same FHFA research found that the lock-in effect increased national home prices by 5.7%, which more than offset the 3.3% decrease you would expect from higher rates. So the lock-in is not just freezing the market. It is making it more expensive for everyone else.

Enter the Portable Mortgage Conversation

In November 2025, FHFA Director Bill Pulte posted that the agency is “actively evaluating portable mortgages.” The idea is simple: what if you could take your mortgage rate with you when you move? Sell your current house, buy a new one, and keep your 2.8% rate on the new loan.

Canada has been doing this for years. They call it “porting.” You sell your home, buy a new one within 30 to 120 days, and your lender transfers your existing rate, balance, and terms to the new property. If the new home costs more, you get a blended rate on the additional amount. You have to re-qualify, and you have to stay with the same lender. But the core mechanic works.

The UK does it too.

So naturally, the American response has been to debate whether this is even possible, commission studies about it, and wait for Congress to maybe pass a law in a year or two. Meanwhile, 1.33 million sales are missing from the market every 18 months.

But here is what bugs me about this whole conversation. Everyone is treating the portable mortgage like it is some radical new financial instrument that has never been tried. Like we need to invent something from scratch.

We don’t.

The Answer Already Exists. It Is Called Collateral Substitution.

In commercial real estate, there is a concept called collateral substitution. It is exactly what it sounds like: you swap the asset that secures a loan for a different asset. The lender releases their lien on Property A and records a new lien on Property B. The loan terms stay the same. The borrower keeps their rate.

The key test is straightforward. The new collateral has to provide a recoverable value that is equal to or greater than what is being released. In plain English: the new property has to be worth at least as much as the old one relative to the loan balance.

SBA lenders do this. Fannie Mae has explicit rules for collateral substitution in their multifamily lending guide. Commercial borrowers negotiate these all the time. If you have a loan on a strip mall and you want to sell that strip mall and buy an office building, you can work with your lender to substitute the collateral. Same loan. Same rate. Different building behind it.

The concept is proven. The mechanics exist. The legal framework has been tested.

So why are we pretending this is impossible for residential mortgages?

What This Would Look Like for a Homeowner

Lets walk through a scenario because I think this is where it clicks.

Say you bought a home in 2021 for $500,000. You got a 30-year fixed at 2.8%. Your current balance is around $420,000. The home is now worth $550,000.

Your family has grown. You need a bigger house. You find one for $700,000.

Under today’s system, here is what happens. You sell your $500,000 home, pay off your $420,000 loan, and walk away with roughly $130,000 in equity (minus closing costs). Then you take out a brand new mortgage at 6.5% on the $700,000 house. Your monthly payment goes from about $1,700 to about $3,500. For a lot of families, that math just does not work. So you stay in the smaller house and hope things change.

Now imagine a collateral substitution framework. You sell the $500,000 home. The lender releases their lien. You buy the $700,000 home. The lender records a new lien on the new property. Your $420,000 balance at 2.8% transfers to the new home. For the additional $150,000 you need (after applying your equity), you get a second lien at the current market rate.

Your blended payment? Roughly $2,200 instead of $3,500.

And here is the part I think the policy people are missing: the lender’s position actually improved. They went from having a $420,000 lien on a $550,000 house (76% LTV) to a $420,000 lien on a $700,000 house (60% LTV). Their collateral got better. Their risk went down.

Why would a bank say no to that?

Why It Is Not That Simple (But Not as Hard as People Think)

Ok. I hear you. If this were that easy, we would already be doing it. So lets talk about the real obstacles.

The MBS problem. Most American mortgages do not just sit on a bank’s balance sheet. They get packaged into mortgage-backed securities and sold to investors. When an investor buys an MBS, they are buying a specific risk profile: a pool of loans secured by specific properties in specific locations with specific borrower credit profiles. If you start swapping the underlying collateral, you are changing what the investor bought.

This is the biggest technical hurdle and it is legitimate. But think about what actually changes. The borrower is the same person. The loan balance is the same. The rate is the same. And the collateral is equal or greater in value. The investor’s position is maintained or improved. Is this really a dealbreaker, or is it just a documentation problem?

The servicing cost problem. Right now, processing a simple loan assumption costs servicers upwards of $10,000 per loan, according to Matthew VanFossen at Absolute Home Mortgage. Servicer fees are capped at $1,800. The math does not work for them. A collateral substitution process would need to be streamlined and standardized before it could scale. But that is an operations problem, not a conceptual one.

The lender revenue problem. And this one is the quiet part nobody says out loud. When you sell your house and take out a new mortgage at a higher rate, someone makes money on that origination. A portable mortgage means that origination does not happen. As Brendan McKay at the Broker Action Coalition noted, making conventional mortgages portable “would likely reduce originations and further strain an already struggling industry.”

I get it. But I would argue that a functioning housing market with 1.33 million more transactions is better for the industry than a frozen one where nobody moves. More transactions mean more commissions, more title work, more appraisals, more inspections, more moving companies, more furniture sales. The entire ecosystem benefits when people can actually move.

The first-time buyer problem. Chen Zhao at Redfin raised a fair point: portable mortgages would “benefit existing homeowners and not improve affordability for first-time homebuyers because they do not have an existing mortgage with an ultra-low rate.” This is true. Collateral substitution helps people who already own homes. It does not directly help renters trying to buy their first one.

But indirectly? If the lock-in breaks and inventory comes back to the market, prices moderate. More supply means more choices and more negotiating power for buyers. The lock-in is hurting first-time buyers too, just from the supply side instead of the rate side.

What Is Already Happening

The market is not waiting for Congress to figure this out.

A startup called Roam has raised $17.5 million to connect buyers with homes that have assumable mortgages. These are FHA, VA, and USDA loans, which by law can be transferred from seller to buyer. Roam found that in the Houston market alone, Zillow showed 5 listings mentioning assumable mortgages while Roam’s platform showed 2,500 with rates between 2% and 4%. Their customers save an average of $700 per month.

But here is the limitation. Only about 25% of American mortgages are assumable. The other 75%, the conventional loans backed by Fannie Mae and Freddie Mac, are not. That is precisely the gap where collateral substitution could matter.

And the FHFA is studying it. The fact that the agency overseeing Fannie and Freddie is “actively evaluating” portable and assumable mortgages is significant. They would not be spending time on this if they did not think there was something to it.

The Concept Is Not Radical. The Will Is What Is Missing.

Lets step back and look at what we actually know.

Collateral substitution works in commercial real estate. It has been tested, litigated, and standardized. Mortgage porting works in Canada and the UK. Millions of homeowners have done it. Loan assumptions already work for FHA, VA, and USDA loans in the US, and a startup has built a $17.5 million business around just making them easier to find.

The underlying concept, that a lender can release their lien on one property and secure the same loan against a different property of equal or greater value, is not controversial. It happens every day. Just not for conventional residential mortgages.

1.33 million missing home sales. Home prices inflated 5.7% by artificial supply constraints. A market so frozen that transaction volumes look like 2009. And a solution framework that already exists in adjacent parts of the same industry.

The question is not whether portable mortgages are possible. The question is whether the people who profit from the current system, the originators, the servicers, the MBS investors who benefit from predictable prepayment speeds, will let it happen.

I would argue that a frozen market is not good for anyone. Not for homeowners who are stuck. Not for buyers who have nothing to choose from. Not for agents and lenders who depend on transactions to make a living. And not for communities that need mobility to function.

We already know how to do this. The mechanics are not the hard part. The hard part is deciding that we want to.