| Page 2 of 2 < |
Getting Easier to Get Big Loans
Fannie Mae is removing its demand for higher down payments in areas it considers "declining," including Washington.
(By Ken Cedeno -- Bloomberg News)
TOOLBOX
   Resize
COMMENT
 Discussion Policy
 CLOSE
Comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions. You are fully responsible for the content that you post.
Who's Blogging  |
In December, Fannie and Freddie started to require an extra 5 percent down in areas where it had determined that home prices were falling. The policy applied even to neighborhoods where prices have been stable or increasing slightly.
Officials at Freddie Mac announced that loans with 5 percent down or less can still be made in declining markets if the loan is for a single-family home that is the borrower's main residence, and the borrower has good credit. It must not be a cash-out refinance.
Fannie and Freddie, government-chartered corporations that purchase mortgages and repackage them for sale to bond investors, cover a huge portion of the mortgage market, and so their standards influence the whole industry.
You're in good company if you find the talk about jumbo-this and jumbo-that a bit, let's say, jumbled. Even those in the mortgage business are searching for appropriate names. ("Jumbo jumbo" hardly reflects the work of a suave marketing team.)
The new category of loan amounts, with the clumsy and contradictory name conforming jumbos, is a creature of the economic stimulus package that Bush signed into law in February.
The credit crunch that's been going on since last August had been making loans especially difficult to get for what used to be considered jumbo amounts, more than $417,000. They were too big to be bought by Fannie and Freddie, and few other investors were interested in buying mortgage-backed securities at any price. That made jumbos particularly difficult for borrowers to obtain, even if they had good credit scores.
What's a "conforming loan," anyway? It's one that conforms to the standards of Fannie and Freddie. Until the passage of the economic stimulus legislation early this year, only a loan amount below $417,000 qualified.
Until very recently, the new conforming jumbos were orphaned by the market. Fannie and Freddie weren't exactly sure what to do with them, and neither were bond investors. That's why few were being made, and they didn't offer significant interest-rate savings.
That changed a few weeks ago when Freddie Mac, under pressure to do more to help stabilize the mortgage and housing markets, announced it would buy between $10 billion and $15 billion of the new conforming jumbo mortgages from major lenders such as Wells Fargo Home Mortgage, Chase, CitiMortgage and WaMu. That was enough to break the logjam and make the loans affordable, attractive options for buyers and refinancers.
"Everything started popping about two weeks ago," Foley said. "These higher loan amounts are definitely helping."
E-mail Elizabeth Razzi atrazzie@washpost.com.
