Do We Need the 30 Year Self-Amortizing Fixed Rate Mortgage with an Unlimited Prepayment Right?

Anthony Sanders and Michael Lea critically examine the preferred position in American real estate financing of the 30 year self-amortizing fixed rate mortgage with an unlimited prepayment right.  Anyone with a fixed-rate mortgage who has a house that is currently underwater and has been unable to refinance into the lower mortgage rates of the past year or so will recognize that there are costs to that instrument.  More generally, it still isn’t obvious to me that we should encourage people to by 30 years worth of interest rate insurance if they only plan to be in their house for 5 or 7 years.  Maybe we do–but it is not obvious to me.