Financing in New York>Question Details

Gizmo, Home Buyer in Westchester County, NY

Jumbo Mortgage Rates - Bush signed the economic stimulus package on 2/13/08, which raised the limit to

Asked by Gizmo, Westchester County, NY Sun Apr 6, 2008

$729,750. So how come lenders aren't dropping their jumbo mortgage rates to the conforming conventional mortgage rates? Anyone know when they will do so? Thank you. I am wondering whether to take out a jumbo mortgage rate now for $700,000 at 6.375% or wait until the conforming rate to kick in and hopefully get it for about 5.5%.

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Lending answer:

The reason has nothing to do with the banks and their rates.

Rates for "Jumbo Conforming" loans (loans over $417,000 that can be delivered to Fannie and Freddie) are higher because of LLPAs from Fannie and Freddie. LLPA stands for Loan Level Pricing Adjustment. It is an increase in the price charged to a bank to deliver a loan to Fannie or Freddie and is the basis used by the bank to determine the rate.

In this case, the Jumbo Conforming loans are subject to the Adverse Market Delivery Charge, all other applicable LLPAs, and the special LLPAs specific to Jumbo Comforming loans. Simply because of the unit loan volume, they are riskier to Fannie and Freddie and you will pay accordingly.

The American Housing Rescue and Foreclosure Prevention Act of 2008 raises conforming and government loan limits, but does not prohibit Fannie and Freddie from charging higher fees for these oversize loans.

It is extremely doubtful that waiting will save you money, considering that Fannie and Freddie have serious financial problems including a capital shortgage, loss on investor confidence, drop in the exchange value of the dollar (thus forcing Fannie/Freddie to promise higher nominal yields on MBSs to attract foreign investment) as well as increasing competition for investor dollars from foreign markets.

There is absolutely no financial or economic reason on the horizon why rates should drop as low as you hope especially on high risk (eg Jumbo Conforming) loans. You would be wise to lock what you are offered. If things improve as you hope you could refinance... refinancing early in a loan is much less costly than several years into a loan.

Please don't wait for a lower rate, and good luck to you.
0 votes Thank Flag Link Thu Jul 31, 2008
The new conforming limits have an add-on to the conforming 417k limit. You will find the rates better than your jumbo but worse than your 417k conforming loan. Today the 729,750 loan wold be 6.625% and the 417k at 5.75%. Don't expect the new conforming increase to have much lower rates and also its only temporary.
1 vote Thank Flag Link Tue Apr 8, 2008
As per one of our trusted mortgage brokers, not all lenders have rolled out the program and pass the lower rates to consumers. Your choices are to work with one of the lenders that has implemented the program, i.e.., Wells Fargo or Countrywide or wait until additional lenders start to get on board with the program. I am looking at a rate sheet that compares a mortgage amount of $729,750 with a non-conforming jumbo rate of 6.625% ($4,672.67 payment) to Countrywide's Temporary Conventional Rate of 5.625% ($4,200.85) as of April 3. Please feel free to email me if you would like the name of this broker who has the program.
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1 vote Thank Flag Link Sun Apr 6, 2008
wait for the 200bps but it's surprising that you can't find a better rate than 6.37 - unless you don't qualify for a conforming loan. do not expect lenders to drop their non-conventional rates any time soon simply because they (a) need to make money off the spread, and (b) can't monetize the mortgages so they need to make a current yield that justifies locking up the capital on their balance sheet. call around, go direct with lenders. you do not pay fees in this environment, period. just keep in mind that rates will stay low for another 12 to 24 months; home values will be lower. there is plenty of time to be picky.
1 vote Thank Flag Link Sun Apr 6, 2008
I don't think if they gona bring down to 5.5% for jumbo loan. you can call us we can do little better for you.
call us at 516-739-2243
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0 votes Thank Flag Link Sun Apr 6, 2008
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