Jumbo Mortgages, Jumbo Headaches
Jumbo loans have been a problem for quite some time now. The loan to values are restricted, there isn’t much of a secondary market for them anymore, and the rates are not very good unless you are doing a 5, 7, or 10 year ARM.
“President Barack Obama’s housing stability plan, announced last week, excludes such borrowers from nearly all of its mortgage-bailout provisions. Instead, it focuses on middle-income consumers who have lower, so-called conforming loans. Such loans top out at $417,000 in most parts of the country, though they can run as high as $729,750 in certain pricier markets, such as parts of California, New York and Hawaii.
Anything bigger is called a “jumbo” loan — and not only is the government ignoring this segment of the market, so are lenders, few of whom are originating or refinancing jumbo mortgages. The reason: Jumbo loans are too large to be guaranteed by a government-backed mortgage agency, such as Fannie Mae or Freddie Mac, meaning banks assume the risk if the loan goes bad. In the current lending environment, few banks want to take on any risk.”