Stimulus Package Update for the Mortgage Market: Talk around the water cooler-

Stimulus Package Update for the Mortgage Market: Talk around the water cooler-

ar119683355943424.jpgOne of the most significant steps the federal government has taken in its attempt to bring liquidity and stability back to the mortgage and credit markets was its March decision to expand the capacities of Fannie Mae and Freddie Mac, allowing them to significantly increase the amount of mortgage securities that they can purchase or guarantee and, importantly, raising the limit on “jumbo” loans from $417,000 to as high as $729,750, depending upon the geographic region. Raising the jumbo limit was a key move because it will enable lenders such as Indymac to increase their lending in markets with high property values where many customers were finding it difficult to get a loan due to the inability of lenders to subsequently sell that loan to an investor.

 

Over the past month, however, investor demand for these loans has remained slow to develop, and pricing has, therefore, remained high for consumers. But in the past week, Fannie Mae and Freddie Mac signed agreements with lenders to purchase their jumbo loans under the new $729,750 limit at competitive terms, improving rates for these consumers by roughly .125% – .25% and making it easier for banks to make more loans, particularly in higher-priced areas. To this end, last Friday Indymac signed an agreement with Fannie Mae to purchase Indymac-originated jumbo loans within the $729,750 limit at competitive prices and, as you may have seen, several other banks made a similar agreement with Freddie Mac last Thursday.

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