The Economic Stimulus passed in February allowed FNMA and FHLMC (FannieMae and FreddieMac) to purchase High Cost Area Conforming Jumbo (HCACJ) loans from lenders. Loans made between $417,000 and $729,600 started closing in March of this year, but no one was willing to buy them. FNMA had not yet created bundles of mortgage securities for these HCACJ's, nor clear guidelines on how to sell the loans in the first place.

In late April these agencies contracted with several banks to accept an HCACJ loan which is why pricing for these products have dropped. What was a 6.5% 30 year fixed HCACJ in April is now a 5.75% HCACJ in May. Good news indeed. If you are a buyer with 20% down on a $1,000,000 priced home you can get a $700,000 1^st at 5.75% and, if needed, a $100,000 HELOC 2^nd at 5.25%. Interest rates on jumbo loans are no longer the biggest stumbling block in front of home buyers today.

One catch: borrowers must come up with 15 percent down on a purchase.

However, if Fannie already owns the loan, it will allow a refinance up to 120 percent of the home's current market value to give homeowners a break if property values have plummeted in their neighborhood and they have kept current with their mortgages. (No ‘cash-out' refinances allowed.)

This should be good news, indeed, for both buying a bigger house, or refinancing one out of a "problematic" loan.

As always, give me a call or an email if I can answer any questions about the home buying or selling process.  Serving South Orange County clients and friends since 1976!  Bob Phillips, of ReMax, at 949-643-2100, or BobPhillips@Remax.net.