The new fiscal-stimulus bill temporarily allowed Fannie Mae and Freddie Mac to buy jumbo loans in some of the most expensive markets, heavily concentrated in California, Florida and the Northeast. The new congressional rules allowed the companies to enter the jumbo market to begin buying "super-conforming" loans of up to $729,750.
The impact from Fannie Mae and Freddie Mac’s entry into the jumbo loan market is already flowing through to the markets. Entry into the most expensive tier of the housing markets has seen Jumbo rates fall by about half a percentage point, obtaining these loans are more affordable and accessible for borrowers. Unfortunately, the program is available only to Fannie and Freddie participants.
But the focus is only on Fannie and Freddie loans, owners with other large loans in expensive areas wont be helped by this program.
Markets in expensive areas have been hard hit because money hasnt been available for buyers. Things have changed. The new program has created a thaw in the jumbo markets. Fannie and Freddie have been joined by B of A, Wells and ING. New money should help ease the markets but it wont be easy for buyers to enter. Bank of America requires six months of principal, interest, property tax and insurance payments held in reserve. No one is taking any chances yet, but the competition is a welcome sign of economic health.... remember?
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