Peter J. Wallison's recent article in the Wall Street Journal on government support in the residential housing market, "What's So Special About the 30-Year Mortgage?", is an interesting academic exercise but it has no relevance to the reality of the U.S. housing market.

While it is true that, for many years over the life of a 30-year loan, most of the payments go toward interest payments and not principal, if we were to remove the tax deductibility of the interest paid (regardless of the term of amortization) as some have suggested, we would remove another 33% of value from the American homeowner, based on the marginal rate at the Federal level of 28% and the average State and local tax rate of 5%.

Removing the backstop of federal protection for the 30-year loan to reduce the amortization of loans purchased and/or insured by the GSE/FHA/VA from 30 years to 20 years would change the monthly amortization expense by $1.21 per month per thousand, so a $100,000 loan would increase the payment by $121.00, thereby disqualifying a large segment of the population from qualifying.  

Further constricting a market where the previously unassailable asset of home equity has lost an average of 38 percent since the downturn began would have a ripple effect on quality of life throughout our communities nationwide. 

It would destroy reverse mortgage programs that fund long term security for our senior population.  It would devastate the revenue of local governments, who will be forced to raise the rate on real estate taxes to meet the decrease in value.  

That could result in thousands of abandoned properties and tax sales with no buyers. Local government budgets would be underfunded. The largest recipient of those tax dollars is education, which would be hit hard requiring layoffs of teachers, deferrals of facilities' maintenance, and the inability to pay for bonds to fund new facilities.

Local Governments would find it impossible to support citizen requirements at the same level as today for basic services: Trash collection, street maintenance, police protection, fire protection, and/or public transportation support.

Therefore, the backstop will remain and we will be better for it.