There has been a huge divergence between conforming and jumbo loans since 2007, the disparity become more pronounced rather than less. The trouble is, in the more expensive places where real estate is particularly expensive house buyers need a jumbo loans just to purchase a normal-size family home. According to ‘Inside Mortgage Finance’ there are around 4% of purchasers with jumbo loans that exceed the ceiling set by the Home Stability Plan. This government-backed safety net removes the onus from the banks’ responsibility to that of Freddy Mac and Fannie Mae, providing a degree of security for homeowners who may find themselves in financial trouble. Move into the more expensive areas in and around New York and California and this percentage goes up to 8% and 17% respectively.
Chairman of the Federal Reserve has mooted the suggestion that the ceiling should be raised to $1 million to enable ordinary householders in some of these more expensive areas of America to be able to take advantage of the Home Stability Plan available from Freddie Mac and Fannie Mae. There is opposition to this consideration, mainly because the business policies of Freddie Mac and Fannie Mae were intended to help Americans who were generally not considered affluent enough to get onto the property ladder, not to prop up homeowners whose ailing finances suddenly needed an injection of cash to prevent them from losing their homes.
Jumbo Mortgage or Conforming Mortgage
The choice between a conforming mortgage and a jumbo loan was quite simple for a lot of prospective home owners at one time, not too long ago. Homeowners had the choice of a first and second mortgage, a home equity loan or a jumbo mortgage. First and second mortgages were a popular choice because of the lower blended interest that these attracted, as well as not having to pay mortgage insurance or PMI. Nevertheless, although this was a good choice at the time, since the financial disaster has cause global recession, it is not such a good option now.
In the end, jumbo mortgages were found to be easier to refinance - until, of course, the Home Equity Plan left these borrowers to fend for themselves. At the peak of the financial crisis it was almost impossible to obtain a jumbo loan and, if you were already in possession of a jumbo loan, it was practically impossible to refinance. The Bank of America is now beginning to look in favor of jumbo mortgages again, offering a 30-year fixed rate mortgage with interest rates below 6%, competing with ING Direct who, for some months, has been offering customers jumbo mortgages at around 5.5% interest.
First Internet Bank is also offering a jumbo mortgage. This is a hybrid, fixed for between five and seven years, after which it offers adjustable interest rates re-calculated annually: the interest rate they are offering is 5.375%. For those borrowers who can afford to pay 20% to 30% of the total loan value, GMAC is offering jumbo loans and has made it clear that they are prepared to modify loans to conform to the Housing Stability Plan. At present jumbo loans make up just 5% of their business at GMAC. However, estimations of future business indicate that more and more jumbo loans are likely to be offered in the future, with GMAC relying on a forecast of up to 15% of their business coming from jumbo loan applications by the end of 2010.
Chairman of the Federal Reserve has mooted the suggestion that the ceiling should be raised to $1 million to enable ordinary householders in some of these more expensive areas of America to be able to take advantage of the Home Stability Plan available from Freddie Mac and Fannie Mae. There is opposition to this consideration, mainly because the business policies of Freddie Mac and Fannie Mae were intended to help Americans who were generally not considered affluent enough to get onto the property ladder, not to prop up homeowners whose ailing finances suddenly needed an injection of cash to prevent them from losing their homes.
Jumbo Mortgage or Conforming Mortgage
The choice between a conforming mortgage and a jumbo loan was quite simple for a lot of prospective home owners at one time, not too long ago. Homeowners had the choice of a first and second mortgage, a home equity loan or a jumbo mortgage. First and second mortgages were a popular choice because of the lower blended interest that these attracted, as well as not having to pay mortgage insurance or PMI. Nevertheless, although this was a good choice at the time, since the financial disaster has cause global recession, it is not such a good option now.
In the end, jumbo mortgages were found to be easier to refinance - until, of course, the Home Equity Plan left these borrowers to fend for themselves. At the peak of the financial crisis it was almost impossible to obtain a jumbo loan and, if you were already in possession of a jumbo loan, it was practically impossible to refinance. The Bank of America is now beginning to look in favor of jumbo mortgages again, offering a 30-year fixed rate mortgage with interest rates below 6%, competing with ING Direct who, for some months, has been offering customers jumbo mortgages at around 5.5% interest.
First Internet Bank is also offering a jumbo mortgage. This is a hybrid, fixed for between five and seven years, after which it offers adjustable interest rates re-calculated annually: the interest rate they are offering is 5.375%. For those borrowers who can afford to pay 20% to 30% of the total loan value, GMAC is offering jumbo loans and has made it clear that they are prepared to modify loans to conform to the Housing Stability Plan. At present jumbo loans make up just 5% of their business at GMAC. However, estimations of future business indicate that more and more jumbo loans are likely to be offered in the future, with GMAC relying on a forecast of up to 15% of their business coming from jumbo loan applications by the end of 2010.
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