Jumbo Loans Have Limits
March 08. 2008
The new conforming loan limits, good until Dec. 31, have arrived and the new loans at these limits will be called jumbo conforming loans. Los Angeles, Orange and Ventura counties' new loan limit is $729,750.
The big question is, what does this mean to homeowners or home buyers?
The new loan limits are accompanied by much stricter loan guidelines as established by Fannie Mae, the giant government- backed purchaser of lenders' loans that are sold to Wall Street investors to be used for mortgage-backed securities.
For lenders to be able to sell their loans to Fannie Mae and free up their money to be able to do more loans, their loans must meet Fannie Mae guidelines.
Some of the most strict guidelines are:
A minimum mid-FICO score of 660
Full documentation (no stated loans)
Only one-unit property loans
No cash-out refinances (over $2,000)
Fannie Mae won't start buying the new fixed-rate loans until April 1 and the adjustable-rate loans until May 1. Of as much importance, is what the interest rates will be on them when they do.
Don't expect them to be as low as the traditional conforming loan interest rates. And don't expect them to be available anytime soon.
At a recent housing summit, David Mudd, Fannie Mae's CEO, criticized the securities industry and Financial Markets Association for wanting to segregate the jumbo conforming loans from smaller ones in the secondary market when he said the move meant "a separate market is effectively going to have to be established and created" for the larger loans, and "as a result of that, the impact will take longer to be realized" in terms of helping the housing market.
The chief economist for the Mortgage Bankers Association said recently it will take lenders three to six months to make technical changes so their systems can process the larger loans.
So what should homeowners and home buyers do in the meantime?
One alternative is to wait it out, but with interest rates on the rise that may prove very costly to do. Another, possibly better, alternative is to find one of the few lenders that is already offering interest rates on jumbo conforming loans almost equal to those on conforming loans.
Either way, lower jumbo loan interest rates and monthly mortgage payments should be a reality for many in the not too distant future.
By BLAKE KLECKNER
Source: SAN GABRIEL VALLEY
(c) 2008 San Gabriel Valley Tribune. Provided by ProQuest Information and Learning. All rights Reserved.
|
