Mortgage bankers lobbied hard to get the loan limits on Fannie Mac and Freddie Mac insured loans increased. In high-cost California the limit was raised to $729,000. The changes were announced in March and were supposed to go into effect April 1.
But morgage brokers have yet to see the benefit. The spread between jumbo rates and conforming rates remains unusually high. A 30 fixed rate conforming loan costs 5.66% presently. The jumbo version: 7.11%. “The standard .25% to .5% spread between and conforming and jumbo is now 1.5%,” says Peter Ogilvie, president of California Assoc. of Mortgage Brokers. “It didn’t fall as much expected.”
Ogilvie says Fannie and Freddie should be rollowing out new loan products come May 1 that will help make mortgages more affordable. For now though loan volumes remain weeak as skittish buyers sit on the sidelines and the anticipated increase in refinancings is delayed. “Once lending practices loosen up and as rates fall, banks are going to want to loan money again,” says Mark Boud, president of consulting frim Real Estate Economcis. “There’s going to be a refi boom.”
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.