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Jumbos Go to Washington
Posted By Steve Cook On May 19, 2009 @ 9:57 am In Beyond Today's News, Crisis Programs | No Comments
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.
Builder Magazine April 30, 2009
Jumbo mortgages became more expensive and harder to come by as the nation’s credit crisis deepened. That might be starting to change.
Wall Street Journal April 5, 2009
Jumbo Mortgage Market is Holding Recovery Back, Realtors® Report
National Association of Realtors News Release, May 13, 2009
What’s a poor congressman to believe?
Just when it looked as though the jumbo business was coming back to life, Realtors and are mounting a lobbying campaign to get Congress to lower their cost by making permanent the current rules for determining limits that apply in 2009, use the Term Asset-Backed Securities Loan Facility (TALF) to buy jumbo loans, and increase lender competition by loosening warehouse line of credit.
The fact is that the jumbo picture may be improving slightly with new products like Bank of America’s new 30-year fixed mortgages with rates starting in the upper 5% range, they also require six months of principal, interest, property tax and insurance payments in reserve — plus fully documented income, solid credit scores and a full appraisal, according to Calculated Risk. Or ING Direct’s jumbos priced in the 5% range—that require 25 percent down.
But even with more jumbo credit available, the market is still terrible. Rates in excess of seven percent are slowing sales in high cost regions, even with the temporary increase in loan limits to $729,750 in high cost areas passed in the stimulus package in February. The Obama program purposefully left jumbos out of the Making Home Affordable programs. Homeowners with jumbos find to their dismay that they can’t get rates low enough through the refinancing program to make it worthwhile.
NAR makes a convincing argument for revving up the jumbo market. Inventories are so high that sales have come to a halt in some neighborhoods and the months supply for houses over $750,000 is 70 months. Defaults are rising. Moreover, higher priced transactions make a greater contribution to the economy—a total of $263 billion.
Read NAR’s argments here. jumboloan.pdf
Once again the ball is in Congress’ court. Does the real estate industry have the clout to convince a Democratic Congress that homeowners living in houses priced in the top ten percent bracket need a break? Stay tuned.
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