When President Bush signed into law a $150 billion federal economic stimulus package, we thought that he was giving the lenders in our market something
they’ve had trouble finding during the credit crunch: buyers for their big home loans. The measure allows Fannie Mae and Freddie Mac to buy conforming loans up to $729,750, well above the former $417,000 loan limit that the two secondary mortgage market companies were previously authorized to buy under the old guidelines.
Lenders have shied away from jumbo loans as credit market conditions worsened over the past year, contributing to the tightening of mortgage markets across the country. Those old jumbo loan rates ran a full percentage point above the conforming rate.
We hoped that the new "jumbo conforming" rate would be just the thing to stimulate our market...higher loan limits opening up desirable inventory for first-time buyers, with existing home owners jumping into the market. If home owners are able to afford that move-up house, their current house becomes the perfect listing for first-time buyers — and more advantageous financing will be available for these younger buyers too, especially if they go with federally backed FHA loans, which are also raised to the higher limit.
Two problems: The promised "quick implementation" is very slow to come about, and the much-awaited loans in the area between the old conforming and new conforming limits are no better for the consumer than the old jumbo rates. A recent lender quote was 5.875% for loans under $417,000 and 6.75% for those in the "jumbo conforming" category. Much Ado About Nothing.
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