The Housing Chronicles Blog: Jumbo loans making a comeback

Thursday, April 30, 2009

Jumbo loans making a comeback

For buyers of homes in high-priced areas or looking to move up to a home that's too high for Fannie Mae or Freddie Mac to buy, there's some good news: jumbo loans are reappearing for terms that are becoming more reasonable. From a story:

Forced to near extinction by shaky credit markets, the jumbo mortgage loan is making a comeback, which is good news for builders who sell high-end homes or build in expensive markets.

Interest rates have improved, and more financial institutions are starting to lend money for home mortgages with price tags too high to be bought by Fannie Mae or Freddie Mac, said industry watchers...

Bank of America recently announced it was jumping back in the jumbo business. ING has also been offering the loans above the $417,000 conforming limit in most markets and $729,750 in high-cost areas.

Keith Gumbinger, of HSH Associates, a mortgage research firm and publisher, said banks are more willing to lend money for jumbo loans because they have more cash to lend, and there aren’t many other profitable places to put it. Banks have more cash on hand because of TARP money and because the low interest rates have led many home owners to refinance their homes, paying off their old loans in the process....

Still, while rates on jumbo loans have declined significantly from last fall, roughly 160 basis points from 7.90% at Halloween, they still are higher historically compared to conforming home loans. Last year there was roughly a three percentage-point difference and now it’s down to closer to a two-point spread...

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