Thursday, February 7, 2008

Senate Passes Conforming Loan Increase!

As part of the overall Economic Stimulus package the Senate voted and passed the provision within the bill to expand the conforming loan limits to allow Fannie Mae and Freddie Mac to buy conforming loans worth as much as $729,750 for loans made between July 31, 2008 and Dec. 31, 2008, an increase over the current $417,000 loan limit, a move that could help struggling homeowners to refinance jumbo loans at a lower interest rate. It will also allow the Federal Housing Administration to insure loans as high as $729,750 in expensive markets. To find your areas median home value visit the National Association of Realtors site. They have the most user friendly numbers.

This should be a welcome boost to home sales within the price range of the 125% upper limit for median value of a city. We don't expect a dramatic improvement in 30Y jumbo loan rates, most analysts are speculating that rates might improve by as much as .50% compared to where they are now. Historical low jumbo loan rates are available now on 5Y, 7Y and 10Y fixed most clients are locking in rates in the low to mid 6% area. This is down from the mid to high seven percent range over the last few months. The jumbo market most improved by the congressional action is likely to be the 30Y fixed as investors(banks, foreign investors, etc) don't have a great appetite for 30Y paper so they are demanding higher rates than what one would expect.

The conforming loan limit change doesn't happen till mid summer. For those in falling markets looking at their neighborhood drop in value it is wise to consider your refinance options now as equity is the most important factor in lending. To get the best loan terms your loan balance should be no more than 80% of the value of your home and of course having great credit gives you access to the best jumbo loan rates.