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As part of the Obama administration’s stimulus package home owners in high-cost areas will be eligible to get a new mortgage through Fannie Mae or Freddie Mac up to $729,750. This is the same amount covered under the expanded Fannie and Freddie guidelines of 2008 that originally expired in 2009. The previous high-cost loan amount was $625,500.
This is a big deal for parts of California and other high-cost areas as it provides liquidity and a financing vehicle for homes that prior to this amendment could only get financing through “jumbo” home loans. Jumbos have been taking a beating lately, and the lack of a government buyer has sent interest rates for non-conforming (those that can be purchased by Fannie Mae and Freddie Mac) through the roof.
With more and more jumbo home owners seeing their loans reset (jumbo home loans often followed their cousins in the Alt-A world and had reset periods of 5, 7 and 10 years as opposed to two like subprime mortgages) that segment of the market has continued to deteriorate. With little financing available and stricter credit and income requirements homeowners of these large homes have been the odd man out and its shown with an increase in the segment’s delinquencies and defaults.
This news should help those high-cost areas a bit; but homeowners still have to prove income that qualifies for that large mortgage amount. An inconvenience that most jumbo borrowers didn’t have to deal with the last time around. Additionally, self-employed business owners at this level of the market find it difficult to qualify for mortgages through Fannie and Freddie because of limited taxable earnings and the way that expenses and income are shared/distributed to the owners of these businesses.
Either way, if you have a jumbo mortgage you’re breathing a bit easier assuming you actually made what you said you made on your last mortgage statement. And that’s a big IF.
More from the Mortgage Insider:
Homeowners and shoppers in Orange County will get lower rates on larger mortgages according to an announcement today by the Federal Housing Finance Agency (FHFA) and the Office of Federal Housing Enterprise Oversight (OFHEO).
Folks in Orange County can borrow up to $729,750 to buy a home or refinance and still enjoy the lower rates available on loans that are sold to Fannie Mae and Freddie Mac. Such loans are dubbed “conforming loans.”
Last 3 posts by Morgan
- Subprime Bananas - June 28th, 2009
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